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TAMARA BACKOVIĆ VULIĆ - BIBLIOGRAFIJA
Rad objavljen u renomiranom međunarodnom časopisu:
1. Vesna Karadžić and Tamara Backović, “The Montenegrin Capital Market: Calendar
Anomalies”, Economic Annals, Volume LVI, No. 191, 2011., ISSN: 0013 – 3264
Časopis “Economic Annals” je akademski časopis koji se publikuje kvartalno. Izdavač je
Ekonomski fakultet u Beogradu, Univerzitet u Beogradu. Radovi se objavljuju na engleskom
jeziku. Časopis je rangiran u bazi podataka Elsevier Scopus® od strane SCImago Journal &
Country Rank rangom Q3.
2. Tamara Backović Vulić, “Characteristics of Montenegrin capital market in terms of
efficiency”, odobren za štampanje u narednom broju časopisa Journal of Social and Business
Studies, Volume 1, Issue 2, 2014. , ISSN print: 2303-6044, ISSN online: 2303-6176
Časopis “Journal of Social and Business Studies” je međunarodni časopis koji se publikuje
dvomjesečno. Izdavač je Social and Business Development Cenar u Sarajevu, neprofitna
organizacija čiji je cilj poslovanja unapređenje obrazovanja, društva, kulture, poslovnog i
tehnološkog razvoja kroz organizovanje seminara i konferencija, kao i objavljivanjem
rezultata naučnih istraživanja.Radovi se objavljuju na engleskom jeziku. Časopis je
indeksiran u sledećim međunarodnim bazama: Open Academic Journals Index (oaji.net),
Google Scholar (scholar.google.com) i SHERPA/RoMEO (www.sherpa.ac.uk).
3. Tamara Backović Vulić and Vesna Karadžić, “Montenegrin Capital Market
Characteristics Based on Financial Time Series Analysis”, Economics & Economy,
Volume 1, No. 3, 2014., ISSN: 2336‐9213
Časopis “Economics & Economy” je međunarodni naučni časopis, čiji je izdavač NVO
“Economic Laboratory for Transition Research” (ELIT) iz Podgorice. U njemu se objavljuju
teorijski, empirijski i aplikativničlanci iz svih područja ekonomske nauke.Časopis se
objavljuje dva puta godišnje.
Ostali objavljeni radovi:
4. Tamara Backović, “Analiza vremenskih serija na primeru berzanskih indeksa u Crnoj
Gori”, Preduzetnička ekonomija, Volume XIV, 2006., ISSN 1451-6659
5. Tamara Backović, “Proces donošenja odluke – intuicija ili primena formalnog modela
odlučivanja”, Preduzetnička ekonomija, Volume IX, 2005., ISSN 1451-6659
6. Tamara Backović, “Uticaj preduzetništva na ekonomski rast i razvoj – teorijskoempirijski pristup”, Entrepreneurial economy, Volume VII, 2004., ISSN 1451-6659
Radovi prezentovani na međunarodnim konferencijama:
7. Tamara Backović Vulić, “Testing the Efficient Market Hypothesis and its Citics Application on the Montenegrin Stock Exchange”, IX Annual Conference “Global
Imbalances, Financial Institutions, and Reforms in the Post-Crisis Era” organized by
European Economics and Finance Society in Athens, Greece, 2010.
published on website address: http://www.eefs.eu/conf/Athens/Papers/550.pdf
8. Vesna Karadžić and Tamara Backović, “Stock Exchange Characteristics Based on
Financial Time Series Analysis”, 6th International Conference of ASECU: Economic
Development, Tax System and Income Distribution in the Countries of Southern and Eastern
Europe, 2010.
9. Vesna Karadžić and Tamara Backović, “Financial time series analysis based on
Montenegrin stock exchange market indices”, VIII Annual Conference “Current
Challenges in the Global Economy: Prospects and Policy Reforms”organized by European
Economics and Finance Society in Warshaw,Poland, 2009.
published on website address: www.eefs.eu/conf/Warsaw/Papers/580a.pdf
10. Vesna Karadžić and Tamara Backović, „Applied analysis of financial time series based on
the Montenegrin capital market indices“, International Conference on Applied
Economics (ICOAE), Thesalloniki, 2008.
published on website address: http://kastoria.teikoz.gr/icoae2/wordpress/wpcontent/uploads/articles/2011/10/054-2008.pdf
Tamara Backovic Vulic <[email protected]>
JSBS 14 - Editorial Decision
Editor <[email protected]>
To: Tamara Backovic Vulic <[email protected]>
Cc: Emina Mekic <[email protected]>
Mon, Nov 3, 2014 at 3:11 PM
Dear Dr Backovic Vulic,
This is to inform that our Editorial team decided to accept your paper "Characteristics of the Montenegrin Capital
Market in Terms of Efficiency" for publication in Volume 1 Issue 2. Please be informed that in order to cover the
costs of journal design and printing, donation/publication fee is 45 $. Please follow our instructions for your
payments http://www.sbdcenter.com/donate/ and we will send you invoice by PayPal in next email.
Thank you for your support and your contributions.
On Thu, Oct 16, 2014 at 5:45 PM, <[email protected]> wrote:
[Quoted text hidden]
-Mersid Poturak
Social and Business Development Center
Chairman of Assembly
Journal of Social and Business Studies Editor
www.sbdcenter.com
Biografija sa Bibliografijom
KARADŽIĆ DR VESNA, vanredni profesor
Diplomirala na Ekonomskom fakultetu u Podgorici, sa prosječnom ocjenom 10, kao najbolji
student generacije; magistrirala na University of Columbia (New York, USA), a doktorirala
na Ekonomskom fakultetu u Podgorici. Imala studijski boravak na London School of
Economics. Na Ekonomskom fakultetu radi od 1983. godine, od 2007. godine je u zvanju
vanrednog profesora. Kao gostujući profesor predaje na specijalističkim studijama na
Fakultetu političkih nauka i doktorskim studijama na Medicinskom fakultetu Univerziteta
Crne Gore. Prodekan je za međunarodnu saradnju, rukovodilac magistarskih studija
Ekonomija, predsjednik Komisije za postdiplomske studije „Preduzetnička ekonomija“, šef
usmjerenja Kvantitativna ekonomija, član Senata Univerziteta Crne Gore, član Upravnog
odbora ASECU (Association of SE Europe Economic Universities). Vanredni je član
Naučnog društva ekonomista.
Na Ekonomskom fakultetu predaje predmete Ekonometrija i Statistika. U nastavi i
istraživanju bavi se i drugim disciplinama: ekonometrijska analiza tražnje, istraživanje
marketinga, istraživačke metode u biznisu. Učestvovala je na više domaćih i međunarodnih
konferencija. Član je redakcije časopisa: Montenegrin Journal of Economics.
U izdanju Univerziteta Crne Gore 2001. godine objavila je monografiju „Ekonometrijska
analiza tražnje“, a najvažniji radovi iz oblasti ekonometrije i statistike su:
1. „Financial time series analysis based on Montenegrin stock exchange market indices“,
European Economics and Financial Society 2009 Conference on „Current Challenges in
the Global Economy: Prospects and Policy Reforms“, Warsaw, 2009,
ttp://www.eefs.eu/conf/Warsaw/Papers/580a.pdf
2. „Quality of governance measured by World Bank indicators for the region of south-east
Europe“ (koautor), South-East Europe Review, Vol. 11, No. 4, Brussels, 2008.
3. „Applied analysis of financial time series based on the Montenegrin capital market
indices“, International Conference on Applied Economics (ICOAE), Thesalloniki, 2008.
4. „The Quality of Governance Impact to the FDI Inflow – Balkan Case“ (koautor) Zbornik
International Conference Contemporary Challenges of Theory and Practice in
Economics, Ekonomski fakultet, Beograd, 2007.
5. “Modeli kompleksne analize tražnje”, Montenegrin Journal of Economics, Vol. 2, No. 3,
2006.
6. “Competitivness shadowed by powerty”, Fulbrighters in science Conference, Berlin, 2006.
7. “Osnovni koncepti ekonometrije vremenskih serija”, Preduzetnička ekonomija, Vol. 10,
Podgorica, 2005.
8. “Ekonomski portret crnogorskih domaćinstava”, Matica, 2/2000, Podgorica,
9. ”Ocjena Engelove funkcije izdataka za ishranu domaćinstava u Crnoj Gori”, Zbornik
radova Sym-Op-IS 99, Beograd
10. ”Mjerenje efekata poreske reforme na korisnost”, Zbornik radova Sym-Op-IS 98,
Beograd
11. ”Modeliranje potrošacke tražnje na osnovu teorije životnog ciklusa”, Zbornik radova,
Ekonomski fakultet, Podgorica, 1995.
12. ”Uloga metoda linearnog programiranja u procesu donošenja poslovnih odluka”, Zbornik
radova, Ekonomski fakultet, Podgorica, 1995.
13. ”Analiza elastičnosti tražnje duvana u Crnoj Gori”, Zbornik radova Sym-Op-IS 95, Donji
Milanovac, 1995.
14. ”Statistical Indicators of the Economic Role of Women in Developing Countries”, UNESCO
Conference proceedings, Dubrovnik, 1986.
Prof. Dr Maja Baćović
Mjesto i datum rođenja: 23.05.1976, Podgorica, Crna Gora
Adresa: Jovana Tomaševića 37, Podgorica, Crna Gora
Telefon/Fax: +382 78 11 33 22; +382 69 067 619
e-mail: [email protected] , [email protected]
Obrazovanje
•
Doktorske studije, Ekonomski fakultet, Univerzitet Crne Gore (2002-2005)
•
Postdiplomske studije “Preduzetnička ekonomija”, Ekonomski fakultet, Univerzitet Crne Gore
(1998-2001)
•
Ekonomski fakultet, Univerzitet Crne Gore (1994-1998)
•
Gimnazija “Slobodan Škerović", Podgorica (1990-94)
Radno iskustvo:
•
Univerzitet Crne Gore, Ekonomski fakultet, Podgorica
o Član Vijeca drustvenih nauka Senata Univerziteta Crne Gore (oktobar 2014-)
o Član Senata Univerziteta Crne Gore (2013-2014)
o Prodekan za međunarodno saradnju i nauku (oktobar 2013-)
o Prodekan za međunarodnu saradnju, nauku i nastavu (decembar 2012-septembar 2013)
o vanredni profesor na predmetima: Ekonomska statistika i Makroekonomija za
preduzetnike (2011-)
o docent na predmetima: Ekonomska statistika, Makroekonomija za preduzetnike,
Monetarna statistika, Demografska analiza (2006-2011)
o Asistent, 2002-2006.
o Saradnik, 2000-2002.
Profesionalni angažmani:
•
Član Odbora direktora “Jadransko brodogradilište Bijela”, a.d, Bijela
•
Predsjednik Savjeta statističkog sistema Crne Gore (2006-2011), član Savjeta od 2011-2013
•
Predsjednik Odbora direktora Montenegroberze a.d (2006-2008)
•
Institut za strateške studije i prognoze (istraživač i analitičar) (1999-2007)
•
USAID funded Economic reform project in Montenegro (2001-2005)
Specijalizacije, konferencije, treninzi i radne posjete
1. Horasis, Global China Business meeting, Lake Como, Italy, October 2014.
2. Crnogorska akademija nauka i umjetnosti (CANU), Centar mladih naučnika: “Glavni
trendovi u istraživanju mladih naučnika u savremenoj nauci: promjena paradigme od atoma
ka bitima”, II interdisciplinarna medjunarodna konferencija, Podgorica, septembar 2014.
3. Horasis, Global Russia Business Meeting, Valensia, Spain (April 2014)
4. Horasis, Global China Business meeting, Hague, Netherlands, November 2013.
5. Montenegrin Academy of Arts and Sciences, Centre of Young Scientists: Regional
Conference on Status of Young Scientists and Science in the region, Podgorica, October 1718, 2013.
6. Eduniversal World convention, Bangalore, India (9-12. oktobar 2013)
7. DIEM 2013, Dubrovnik, Hrvatska (Septembar 2013)
8. PRME samit, CEEMAN, Bled, Slovenija (Septembar 2013)
9. OEAD: Conference on Higher education cooperation in Central, Eastern and South Eastern
Europe, Vienna, July 3-5, 2013.
10. Development in Economic Theory and Policy, Bilbao, Spanija, 27-28.jun 2013.
11. Vienna Institute for International Economics (WIIW) and Joint Vienna Institute (JVI): Public
Governance and Structural Reforms, Vienna, Austria (April 2013)
12. Global China Business Meeting, Horasis, Riga, Latvia, November 25-27, 2012
13. “Ukraine and Montenegro: Present and Perspectives”, conference organized by National
Academy of Science of Ukraine, National Academy of Pedagogical Sciences of Ukraine and
Montenegrin Academy of Sciences and Arts, Kiev, 16-19 October 2012.
14. Učešće na sastanku Svjetskog ekonomskog foruma: „World Economic Forum's Annual
Meeting of the New Champions, Dalian, People's Republic of China, 13-16 September
2011”, nakon selekcije organizatora (50 mladih naučnika iz svijeta) a na bazi nominacije
Crnogorske akademije nauka I umjetnosti (2011)
15. Third International Conference on overcoming regional disparities, Cetinje, Montenegro
(organized by: Montenegro Ministry of Economy, UNDP and GIZ), June 2012
16. European Commission, Joint Research Centre, Institute for Prospective Technological
Studies: Workshop on the development of ERAWATCH: ERA and neighborhood countries,
Seville, Spain (November 2009)
17. Vienna Institute for International Economics (WIIW) and Joint Vienna Institute (JVI): Public
Private Partnership, Vienna, Austria (September 2009)
18. 4th Balkan Summer School on Survey Methodology, Durres, Albania, August 31-September
4, 2009, organized by Instat, Albania and Statistics Sweden, Balkan Project Office
19. World Conference on RESEARCH INTEGRITY: Gulbenkian Foundation, Lisbon, Portugal,
16 - 19 September 2007
20. II International symposium on Economic Theory, Policy and Applications, Athens, Greece,
August 2007
21. UNESCO workshop on Science, Technology and Innovation Indicators: Trends and
Challenges, Skopje, March 2007
22. "Europe and Latin America", CLADEA 2006 (September 10-13), Montpellier, France
23. Bruno Leoni Institute: Second Misses Seminar, Sestri Levante, Italy (2005)
24. Vienna Institute for International Economics (WIIW) and Joint Vienna Institute (JVI):
Foreign Investment Policies, Vienna, Austria (October 2005)
25. EEA/ Eastern Economic Association Annual Meeting, Washington, DC, USA (2004)
26. ASSA/ American Economic Association Annual Meeting, San Diego, CA, USA (2004)
27. International Law Institute: Post-privatization: Managing the Challenge, Washington, D.C
(jun 2004)
28. JFDP fellow: University of Delaware (USA), Department for Economics, academic year
2003/04
29. World bank: ”Reforms in SEE countries”, Budapest, Hungary (2003)
30. “Economic Perspectives of Former Yugoslavia states”, Cavtat, Croatia (2003)
31. “Investment opportunities in Serbia and Montenegro”, Brussels and Luxemburg (2003)
32. British Trust fellow: University of Greenwich (UK), Department for Economics, summer of
academic year 2000/01
33. Ronald Coase Institute Fellow, ISNIE - «New Institutional Economics», University of
Tuebingen, Tuebingen, Germany (september 2000)
34. “Financial Management”, Training
Bosnia&Herzegovina (july-august 2002)
for
faculty
members,
USAID,
Mostar,
35. International Management Teachers Academy, CEEMAN, Bled, Slovenia (May 2002)
36. “Corporate Governance”, OECD, Zagreb, Croatia (2002)
37. “Economic Assesment of FRY”, OECD, Paris, France (2002)
38. OECD: International accounting standards, Zagreb, Croatia (2002)
39. OECD: International accounting standards, Istanbul, Turkey (2001)
40. OECD: International accounting standards, Sarajevo, Bosnia and Herzegovina (2001)
41. USAID-«Capital Market Regulation», Dubrovnik, Croatia (2000)
42. USAID-“Reform of the pension system”, Ljubljana, Slovenia (1999)
43. Training for trainers, BLS, Washington, DC, USA (September 1999)
44. “Economic indicators”, BLS, Washington, DC, USA (August-September 1999)
45. IAS fellow, Comparative economic and political systems, Prague, Czech Republic (july
1999)
46. USAID-"Reform of the pension system", Budapest (1998)
47. G-17 fellow, Summer school of economic policy, Belgrade (June 1998)
Objavljene knjige:
1. Maja Baćović: "Demografske promjene i ekonomski razvoj-analiza investicija u humani kapital",
ISSP, Podgorica (2006) (ISBN: 86-84299-05-1)
2. Maja Baćović: "Sistem nacionalnih racuna", ISSP, Podgorica (2003) (ISBN: 86-84299-09-4)
Objavljeni radovi (na engleskom jeziku)
1. Maja Bacovic: "Fiscal policy under ageing society", proceedings of the 4th
international conference: "Entrepreneurship and Innovation as Precondition for Economic
Development", University of Montenegro, Faculty of Economics, ISBN: 978-86-8013371-3
2. Maja Bacovic: "Demand driven growth in small open, import dependable
economy", 1st Dubrovnik International Meeting-DIEM 2013, University of Dubrovnik,
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Department of Economics and Business Economics, Croatia, ISBN: 978-953-7153-30-04
(abstracts), ISBN: 978-953-7153-31-3 (full papers, CD-ROM)
Maja Bacovic: “Population trends and Economic Development of Montenegro in XXI
Century”, Entrepreneurial Economy, Vol XVIII, September 2012, ISSN, 1451-6659, pages: 2338
Maja Bacovic: “Efficiency driven Economic Growth: Investment in Human Capital and
Technological Readiness”, Proceedings of the 7th international conference of Association of
Economic Universities of South and Eastern Europe and the Black Sea Region-ASECU, Rostov
on Don (Russia), 2011, pages 486-497, ISBN: 978-5-7972-1741-1
Maja Bacovic, Milena Lipovina-Bozovic: “Knowledge Accumulation and Economic Growth”,
Faculty of Economics, University of Montenegro and ASECU, ISBN: 978-86-80133-54-6, 2010,
strane: 37-50
M. Bacovic, V. Vujovic: "Property rights and private autonomy in Montenegro", Applied
Economic Research, Published by: Athens Institute for Education and Research, ISBN: 978960-6672-31-6, 2008, pages: 279-288
Maja Bacovic: “Demographic Changes in transition countries: Opportunity or Obstacle for
Economic Growth: case of Montenegro”, European Research Studies, Vol X, issue 3-4, 2007,
ISSN: 1108-2976, pages 31-44
Veselin Vukotic, Maja Bacovic: "Economic Freedom and Economic Growth in South East
Europe" , Transition Studies Review, Publisher: Springer Wien, ISSN: 1614-4007 (Paper)
1614-4015 (Online), Issue: Volume 13, Number 1, May 2006, Pages: 81-91
Maja Baćović: „Small Open Economies and the Global financial crisis“, „Entrepreneurial
Economy“, Vol. XVI/I, Podgorica (2010) (ISSN: 1451-6659), pages: 93-105
Maja Baćović: «The Economic Crisis and Investment in Knowledge», „Entrepreneurial
Economy“, Vol. XVI/II, Podgorica (2010) (ISSN: 1451-6659), pages: 112-125
Maja Bacovic: "Montenegro's Human Development Profile", Montenegro Economic Trends
(MONET), Vol 21, Podgorica (2005), (ISSN: 1451-3617)
Maja Bacovic: "Institutional framework for new statistical system in Montenegro –
Proposed Law on Statistics and Statistical System in Montenegro", Montenegro Economic
Trends (MONET), Vol 20, Podgorica (2005), (ISSN: 1451-3617)
11. Veselin Vukotic, Maja Bacovic, Zoran Djikanovic: "Pension Reforms in Europe and Latin
America", CLADEA 2006 (September 10-13), Montpellier, France (rad prezentiran na
konferenciji, neobjavljen još uvijek)
Objavljeni radovi (na našem jeziku)
12. Maja Baćović: «Preduzetništvo i nezaposlenost u Crnoj Gori», konferencija «Zapošljavanje
kroz prizmu preduzetništva», Ekonomski fakultet, Podgorica, 2012. ISBN: 978-86-80133-63-8,
pages: 229-238
13. Maja Baćović: «Stanovništvo i ekonomski razvoj Crne Gore u XXI vijeku», u zborniku:
Stanovništvo i razvoj», IDN, Beograd, 2012. ISBN: 978-86-7093-140-4, strane: 29-39
14. Maja Baćović: »Determinante rasta produktivnosti i dohotka sa osvrtom na mala i srednja
preduzeća», konferencija «Ekonomski razvoj kroz prizmu preduzetništva», Ekonomski fakultet,
Podgorica, 2011. ISBN: 978-86-80133-56-0, strane: 177-187
15. Maja Baćović: «Ekonomski rast na Balkanu: uslovljen rastom efikasnosti i/ili članstvom u
EU?», u zborniku: «Balkan i EU», Institut društvenih nauka-IDN, Beograd, 2011, ISBN: 978-867093-137-4, strane: 112-122
16. Maja Baćović:„Demografski problemi i njihove imlikacije – kvalitet ljudskog činioca u
razvoju”, u monografiji „Crna Gora u XXI vijeku – u eri kompetitivnosti, Ekonomski razvoj”,
Crnogorska akademija nauka i umjetnosti – CANU, posebna izdanja (monografije i studije),
knjiga 73, sveska 3, Podgorica, 2010, ISBN: 978-86-7215-242-5, strane: 185-199
17. Maja Baćović:„Tržište rada u Crnoj Gori”, u monografiji „Crna Gora u XXI vijeku – u eri
kompetitivnosti, Ekonomski razvoj”, Crnogorska akademija nauka i umjetnosti – CANU,
posebna izdanja (monografije i studije), knjiga 73, sveska 3, Podgorica, 2010, ISBN: 978-867215-242-5, strane: 331-357
18. Maja Baćović: «Ekonomska kriza i investicije u znanje», u zborniku: «Kriza i razvoj», Institut
društvenih nauka-IDN, Beograd, 2010, ISBN: 978-86-7093-133-6, strane: 241-251
19. Maja Baćović: „Investicije u znanje i ekonomske slobode“, u zborniku «Ekonomske slobode i
razvoj Crne Gore», CANU, Podgorica, 2009, ISBN: 978-86-7215-223-4, ştrane: 85-96
20. Maja Baćović: »Mala otvorena ekonomija i globalna finansijska kriza«, u zborniku: «Kriza i
globalizacija», Institut društvenih nauka-IDN, Beograd, 2009, ISBN: 978-86-7093-133-9, pages:
136-145
21. Maja Baćović: »Socioloske odrednice nastanka i razvoja kapitalizma«, u zborniku
"Ekonomija i sociologija", Institut društvenih nauka-IDN, Beograd, 2007, ISBN: 978-86-7093117-6, ştrane: 181-188
22. Maja Baćović: Tržište kapitala-ogledalo tržišne ekonomije“, Miločerski ekonomski forum,
SECG i SES, Miločer, 2008, SBN: 978-86-907245-3-6, strane: 409-416
23. Maja Baćović: „Teorija racionalnih očekivanja: da li se može empirijski potvrditi u
ekonomiji Crne Gore“, „Preduzetnička ekonomija“, Vol. XV/I, Podgorica (2006) (ISSN: 14516659)
24. Maja Baćović: «Konkurencija-preduslov efikasnog funkcionisanja trzista», «Preduzetnička
ekonomija», Vol. 11, Podgorica (2006) (ISSN: 1451-6659)
25. Maja Baćović: «Demografske promjene, investicije u humani kapital i ekonomski razvoj»,
Miločerski ekonomski forum, SECG i SES, Miločer, Budva, 2006, ISBN: 869072451-6
26. Maja Baćović: »Profitabilni biznis i pametna država – kako to izgleda u praksi?«, u zborniku
"Biznis i drzava", Institut društvenih nauka-IDN, Beograd, 2006, ISBN: 86-7093-110-9
27. Maja Baćović: «Cultural Phenomenon of the Liberalism», «Preduzetnička ekonomija», Vol.
10, Podgorica (2005) (ISSN: 1451-6659)
28. Maja Baćović: «Konkurentnost poslovanja u Crnoj Gori - preduslov povecanja bogatstva
naroda», Miločerski ekonomski forum, SECG i SES, Miločer, Budva, 2005, ISBN: 86-9072450-8
29. Maja Baćović: »Investitori u istrazivanje i razvoj (novo znanje): pojedinci i(ili) drzava«, u
zborniku "Pojedinac i drzava", Institut društvenih nauka-IDN, Beograd, 2005, ISBN: 86-7093108-0
30. Maja Baćović: «Demografske promjene u Crnoj Gori», «Preduzetnička ekonomija», Vol. 7,
Podgorica (2004) (ISSN: 1451-6659)
31. Maja Baćović: «Znanje i ekonomski rast: uticaj povecanja nivoa znanja na ekonomski rast»,
«Preduzetnička ekonomija», Vol. 4, Podgorica (2004) (ISSN: 1451-6659)
32. Maja Baćović: «Politika konkurencije u malim tržišnim privredama: kako podspiješiti
konkurenciju u Crnoj Gori», Miločerski ekonomski forum, SECG i SES, Miločer, Budva,
2004, ISBN: 86-84651-02-2
33. Maja Baćović: »Sociološke determinante ekonomskog progresa: kultura i društveni
kapital«, u zborniku "Kultura i razvoj", IDN, Beograd, 2004, ISBN: 86-7093-106-0
34. Maja Baćović: «Humani kapital i ekonomski razvoj: kvantifikacija humanog kapitala i
uticaj investicija u humani kapital na ekonomsku efikasnost», «Preduzetnička ekonomija»,
Vol. 2, Podgorica (2003) (ISSN: 1451-6659)
35. Maja Baćović: «Konvertibilnost novca – preduslov ostvarivanja ekonomskih sloboda
pojedinaca i ekonomskog rasta i razvoja», «Preduzetnička ekonomija», Vol. 1, Podgorica
(2002)
36. Maja Baćović: »Slobodna međunarodna razmjena i ekonomske slobode«, u zborniku "Politika
i slobode", IDN, Beograd, 2003, ISBN: 86-7093-103-6
37. Maja Baćović: «MVP-uticaj na ekonomski razvoj», Miločerski ekonomski forum, SECG i
SES, Budva, 2002
38. Maja Baćović: «Reforma statističkog sistema u Crnoj Gori – preduslov za uključivanje u
svetske ekonomske tokove», Ekonomist (SEJ), Vol 34, Beograd (2001), (ISSN: 0354-5253)
39. Maja Baćović: «Ekonomsko obrazovanje u računovodstvu, reviziji i finansijama», SRRCG,
Računovodstvo i finansije, br.10 (oktobar 2001)
40. Maja Baćović: «Obračun agregata proizvodnje i dohotka u SNA sistemu nacionalnih
računa», Računovodstvo i finansije, br.8 (avgust 2001)
41. Maja Baćović: «Uticaj medjunarodnog kretanja kapitala na ostvarivanje eksterne ravnoteže
u privredi», savjetovanje SECG i SES, Miločer (septembar 2001)
42. Maja Baćović: «Turbo kapitalizam – globalni proces i njegove implikacije u zemljama u
tranziciji», u zborniku "Globalizacija i tranzicija", IDN, Beograd (jun 2001), ISBN: 86-7093097-8
43. Maja Baćović: «Globalizacija i stepen siromastva u svijetu», Globalizacija (zbornik radova),
Ekonomski fakultet, Podgorica (novembar 2000)
44. Maja Baćović: »Opšta obilježja ESA 1995. i nove statističke institucije u Crnoj Gori«, PMB
2000, Ekonomski fakultet, Podgorica, 2000
45. Maja Baćović: «Direktno vs. Indirektno finansiranje institucija visokog obrazovanja»,
Ekonomski fakultet, Podgorica (septembar 2000)
46. Maja Baćović: “Vidovi i efekti postojanja korupcije”, u zborniku "Sistem i korupcija", IDN,
Beograd, 2000, ISBN: 86-7093-093-5
47. Maja Baćović, Zoran Djikanovic: “Proces privatizacije u Crnoj Gori”, NDEJ, Beograd
(Zbornik radova) (mart 2000)
48. Maja Baćović: “Institucionalni okvir za rad privatizacionih fondova u Crnoj Gori”, SEJ,
Miločer, Budva (zbornik radova) (septembar 1999)
Projekti
1. Ministarstvo za ljudska i manjinska prava Crne Gore i UN Woman, projekat: Jačanje ekonomskih
i socijalnih prava žena u Crnoj Gori, izrada publikacije: “Žene i muškarci u Crnoj Gori – 2012”,
konsultant
2. UNDP: Human Development Report for Montenegro, 2011. (član Savjetodavnog odbora i autor
dijela teksta)
3. CANU: Crna Gora u XXI vijeku – u eri konkurentnosti, podprojekat: Ekonomski razvoj 20092010
a. Rad na temu: Demografski problemi i njihove implikacije – kvalitet ljudskog činioca
u razvoju
b. Rad na temu: Tržište rada u Crnoj Gori
4. Agenda ekonomskih reformi za Crnu Goru - 2007-2011
5. Prostorni plan RCG do 2020 godine (2007)
6. Agenda ekonomskih reformi za Crnu Goru-izvještaj i preporuke (2005)
7. Human Development Report for Montenegro, ISSP and UNDP (2005), Koordinator izrade
Izvještaja i autor dijela teksta
8. Transition report for Montenegro, ISSP (2004)
9. Reforma statističkog sistema Crne Gore (2003)
10. Agenda ekonomskih reformi - 2002-2006 (2002)
11. Program obuke za brokere, dilere i investicione menadžere, Komisija za HOV Crne Gore,
predavač (2007)
12. Škola statistike, predavač (2006-2010)
Članstvo:
1. Centar mladih naučnika, Crnogorska akademija nauka i umjetnosti
2. Odbor za ekonomska istraživanja, Crnogorska akademija nauka i umjetnosti
3. Član Predsjedništva Društva ekonomista i menadžera Crne Gore (prethodni Savez
ekonomista Crne Gore)
Strani jezici
Engleski (aktivno)
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Aleksandra Nojković
Osnovni biografski podaci
Aleksandra Nojković rođena je u Beogradu 1973. godine. Diplomirala je na
Ekonomskom fakultetu Univerziteta u Beogradu, na smeru Ekonomska statistika i
informatika 1998. godine. Iste godine upisala je poslediplomske studije na
Ekonomskom fakultetu u Beogradu na smeru Ekonometrija. Magistrirala je 2004.
godine, a doktorirala 2007. godine sa temom Modeli specifične zavisne promenljive u
makroekonometrijskoj analizi privreda u tranziciji.
Na stručnom usavršavanju Aleksandra Nojković boravila je na Univerzitetu Njujork
(New York University), kao stipendista Američkog programa za razvoj mlađih
univerzitetskih kadrova (Junior Faculty Development Program) u periodu: januar-jun
2006. godine i na Londonskoj školi ekonomskih i političkih nauka (London School of
Economics and Political Science), kao stipendista Ministarstva za prosvetu i nauku
Republike Srbije u periodu: oktobar 2011-februar 2012. godine. Pohađala je letnju
školu Kointegracione analize na Univerzitetu u Kopenhagenu (University of
Copenhagen) 2005. godine.
Aktivnost u nastavi
Aleksandra Nojković je zaposlena na Ekonomskom fakultetu Univerziteta u Beogradu
od oktobra 1999. godine. Bila je asistent-pripravnik, a potom i asistent na grupi
predmeta iz oblasti Ekonometrija. Za docenta na istoj grupi predmeta izabrana je u
julu 2008. godine.
Na osnovnim studijama izvodi nastavu iz sledećih predmeta: Ekonometrija, Analiza
vremenskih serija (smer: Statistika, informatika i kvantitativne finansije) i Osnovi
ekonometrije (smerovi: Ekonomska analiza i politika i Međunarodna ekonomija i
spoljna trgovina - opcija Međunarodne finansije).
Na diplomskim studijama angažovana je na predmetima: Ekonometrijski modeli
uporednih podataka i panela (smer: Kvantitativna analiza – Ekonometrija) i
Ekonometrijski metodi i modeli (smerovi: Ekonomska analiza i politika i
Makroekonomija privreda u tranziciji). Na doktorskim studijama matičnog fakulteta
izvodi nastavu na predmetu Ekonometrija 1D. Tokom 2011.i 2014. godine bila je
angažovana na doktorskim studijama Ekonomskog fakulteta Univerziteta Crne Gore u
Podgorici. Bila je predavač na kursu za sticanje zvanja portfolio menadžer pri
Komisiji za hartije od vrednosti Republike Srbije.
Naučno-istraživački rad
Aleksandra Nojković je autor i koautor većeg broja naučnih radova. Dva koautorska
rada publikovana su u časopisima sa SSCI liste. Nekoliko (ko)autorskih radova
Aleksandre Nojković saopšteni su na konferencijama međunarodnog i domaćeg
značaja i potom publikovani u odgovarajućim zbornicima. Aleksandra Nojković je
koautor udžbenika Primenjena analiza vremenskih serija i pomoćnog učila Zbirka
rešenih zadataka iz ekonometrije. U značajnom obimu učestvovala je u pisanju
1
monografija: Strukturni fiskalni deficit i dinamika javnog duga Srbije i Položaj
ranjivih grupa na tržištu rada Srbije.
Od 2001. godine neprekidno je angažovana na projektima Ministarstva za nauku i
tehnološki razvoj Republike Srbije. Takođe je bila istraživač na nekoliko projekata
koji su rađeni za potrebe međunarodnih organizacija (UNDP i EC).
Dobitnica je nagrade Narodne banke Srbije u 2011. godini za koautorski rad “Inflation
Triggers in Transition Economies: Their Evolution and Specific Features“ (sa P.
Petrović i Z. Mladenović), koja se dodeljuje autorima čiji su radovi iz oblasti
makroekonomije ili finansija objavljeni u renomiranim međunarodnim časopisima.
Ostale aktivnosti
Na Ekonomskom fakultetu Univerziteta u Beogradu Aleksandra Nojković bila je član
Komisije za doktorate, član Saveta fakulteta i sekretar Katedre za statistiku i
matematiku. Član je Naučnog društva ekonomista Srbije. Aleksandra Nojković je član
redakcije časopisa Panoeconomicus, vodećeg međunarodnog časopisa koji se izdaje u
našoj zemlji.
Član je mentorske komisije za dva kandidata doktorskih studija na Ekonomskom
fakultetu u Beogradu i član mentorske komisije jednog kandidata na doktorskim
studijama Ekonomskog fakulteta Univerziteta Crne Gore u Podgorici. Bila je mentor
pri izradi dva master rada, kao i član mentorske komisije za četiri kandidata master
studija.
2
R. br.
Prezime
Ime
1 Nojković
Aleksandra
2 Nojković
Aleksandra
3 Nojković
Aleksandra
4 Nojković
Aleksandra
5 Nojković
Aleksandra
6 Nojković
Aleksandra
7 Nojković
Aleksandra
Opis reference
Primenjena analiza vremenskih serija, udžbenik za studente osnovnih i master studija za
disciplinu Analiza vremenskih serija, Ekonomski fakultet, CID, Beograd, 2012 (koautor sa
Z. Mladenović).
Zbirka rešenih zadataka iz ekonometrije, pomoćno učilo za studente osnovnih i master
studija za disciplinu Ekonometrija, Ekonomski fakultet, CID, Beograd, 2011 (koautor sa Z.
Mladenović).
Strukturni fiskalni deficit i dinamika javnog duga Srbije (redaktor M. Arsić), Ekonomski
fakultet, CID, Beograd, 2012 (koautor).
Položaj ranjivih grupa na tržištu rada Srbije (redaktor G. Krstić), UNDP Srbija, 2010
(koautor).
<eng>Inflation Persistence in Central and Southeastern Europe: Evidence from
Univariate and Structural Time Series Approaches, Panoeconomicus, Volume 59(2),
2012, pp. 235-266 </eng> (koautor sa Z. Mladenović).
<eng>Inflation Triggers in Transition Economies: Their Evolution and Specific Features,
Emerging Markets Finance and Trade , Volume 47(5), 2011, pp. 101-124 </eng>(koautor
sa P.Petrović i Z.Mladenović).
<eng>Transition and Growth: Some Unexpected Outcomes, Economic Annals, Volume
LIV, No. 183, 2009, pp. 7-31 </eng>(koautor sa B. Cerović).
Na SCI listi
NE
NE
NE
NE
DA
DA
NE
8 Nojković
Aleksandra
9 Nojković
Aleksandra
<eng>The New Keynesian Phillips Curve in Emerging Europe: Some Methodological
Issues and Empirical Results, 1043-1054, Proceedings of the international scientific
conference From Global Crisis to Economic Growth: Which Way to Take? (editor A.
Praščević), Faculty of Economics, Belgrade</eng>, 2012 (koautor sa Z. Mladenović).
NE
<eng>Discrete Choice Modeling within Nonstationary Panels: Some Empirical Results on
European Transition Economies, 22-25, XXXVIII Simpozijum o operacionim
istraživanjima (<eng>SYM-OP-IS 2011; editords</eng>: J. Vuleta, M. Backović i Z.
NE
Popović), Zlatibor, 2011 (koautor sa Z. Mladenović).
10 Nojković
Aleksandra
<eng> Growth and Industrial Policy During Transition: Economic Annals, Volume LIX, No.
201, 2014, pp. 7-34 </eng>(koautor sa B. Cerović i M. Uvalić).
NE
ISSN: 2303-6044
Vol. 1
No. 1
JOURNAL OF SOCIAL
AND BUSINESS STUDIES
September, 2014
This page is intentionally left blank.
ISSN: 2303-6044
Vol. 1
No. 1
JOURNAL OF SOCIAL
AND BUSINESS STUDIES
September, 2014
PUBLISHER
Social and Business Development Center – SBDC
Adress: Ramiza Salčina 93, 71 000 Sarajevo
Bosnia and Herzegovina
Editor
Mersid Poturak
Editorial Assistant
Amela Poturak
ISSN
2303-6044
Phone:
+38761 498 596
E-mail:
[email protected]
Webpage
http://www.sbdcenter.com/jsbs/
Frequency
six issues per year
Current Volume
1/2014
Indexing and abstracting
OAJI - Open Academic Journals Index
STATEMENT OF PURPOSE
Journal of Social and Business Studies (JSBS) is an international, interdisciplinary peer-reviewed journal,
published by Social and Business Development Center (SBDC), located in Bosnia and Herzegovina. This
journal aims to develop scientific knowledge that links current practice and theory in field of social and
business studies. The journal publishes refereed articles, research notes, case studies, book reviews or any other
type of research that might contribute to society and business in the areas that include, and are related to the
following fields: Business studies; Accounting, management, marketing, entrepreneurship; Business ethics,
business law, law and economics; Operations research, statistics, econometrics, experimental economics;
Business and economics education; Microeconomics: theory and applications; Government regulation,
industrial organization, game theory; International economics; International Business; Macroeconomics,
growth, government finance, monetary economics finance, investments; Sociology; Psychology; Anthropology;
Other – any business or social studies discipline. Submitted manuscripts should be in alignment with journal
guidelines and should not be under consideration elsewhere.
EDITORIAL BOARD
Surname, name
University
Country
Bayraktaroglu Serkan
Sakarya University
TURKEY
Coskun Ali
Fatih University
TURKEY
Dhaoui Abderrazak
University of Sousse
TUNISIA
Ibrakovic Dzelal
University of Sarajevo
BOSNIA AND HERZEGOVINA
Kozarevic Emira
University of Tuzla
Kozarevic Safet
University of Tuzla
Okičić Jasmina
University of Tuzla
Oruč Nermin
International University of
Sarajevo
Ozlen Muhamed Kursad
Ishik University
IRAQ
Shah Iqtidar Ali
College of Applied Sciences
OMAN
JOURNAL OF SOCIAL AND BUSINESS STUDIES
(Volume 1 / Issue 1 / Sept 2014)
CONTENT
Refereed Articles
1
Short-Run Determinants of the HRK/USD Exchange Rate and Policy Implications
Yu Hsing
11
The Impact of Global Financial Crisis in the Albanian Banking System
Alba Cani
29
Is the Republic of Macedonia “Good Lover”? Republic of Macedonia-NATO-EU Case
Study
Biljana Chavkoska
42
Creating Value Added for Leasing Service Customers: Case Study of VB Leasing
Slobodan Vujić, Saša Vujić, Aida Abduzaimović, Ibrahim Obhodaš
55
Consumers Perceptions about Packaging Appearance of Meggle, Milkos and Zim Milk
Products
Ibrahim Obhodaš, Slobodan Vujić, Saša Vujić, Aida Abduzaimović
68
Perceptions towards IT Security of Online Banking by Students of Montenegro
Nedim Makarević
Journal of Social and Business Studies
ISSN: 2303-6044
Vol. 1(1) / pp. 1-10
Yu Hsing
Southeastern Louisiana University
United States of America
[email protected]
Abstract
This paper examines short-run determinants of the Croatian kuna/U.S. dollar
Article History
(HRK/USD) exchange rate based on a simultaneous-equation model. Demand
Submitted: 17 July 2014
and supply analysis is employed to examine the behavior of the HRK/USD
Resubmitted: 31 July 2014
exchange rate. Comparative static analysis is used to determine the impact of a
Accepted: 12 August 2014
change in an exogenous variable on the equilibrium exchange rate. The
EGARCH model is applied in empirical work. Major findings are that the
HRK/USD exchange rate is positively associated with the real 10-year U.S.
government bond yield, real GDP in Croatia, the real stock price in the U.S.
and expected exchange rate and is negatively influenced by real GDP in the
U.S. and the real stock price in Croatia.
Keywords: Exchange Rate Determination; Interest Rates; Output, Stock Prices;
EGARCH
JEL Classification: F31, F41
Citation:
Hsing, Y. (2014). Short-Run Determinants of the HRK/USD Exchange Rate and Policy Implications. Journal of Social and
Business Studies, 1(1), 1-10
Social and Business Development Center – www.sbdcenter.com
1
Yu Hsing
ISSN: 2303-6044
1. Introduction
International trade has become more important in economic growth in Croatia. In 2013, the amount of
exports as a percent of GDP was 42.97%, and the amount of imports as a percent of GDP was 42.42%,
suggesting that Croatia had a relatively high trade openness index of 85.39%. To pursue a balanced
trade or to avoid a trade deficit, the exchange rate plays a pivotal role. Mainly due to the global
financial crisis, the Croatian kuna had depreciated 20.79% versus the U.S. dollar from 4.59398 in
2008.Q1 to 5.549 in 2013.Q4. While depreciation of the kuna would lead to more exports, it is
expected to have some negative effects such as higher costs of imports, import-led inflation,
international capital outflows, etc.
A volatile exchange rate is expected to hurt international trade and economic growth because importers
and exporters are uncertain about costs of exchange for foreign currencies and profits or losses that
trade may have. A substantially over-valued currency would be difficult to maintain as a government
needs to continue to sell foreign reserves to defend the domestic currency and may result in a potential
speculative attack. A substantially under-valued currency would help exports but may be subject to
external pressures to move it to the fundamental value.
This paper attempts to use demand and supply analysis to explain fluctuations of the HRK/USD
exchange rate in order to provide policymakers insights in conducting monetary policy and fiscal
policy to stabilize exchange rates and to pursue economic growth.
In the second section, literature will be surveyed. In the third section, the methodology will be
presented. In the fourth section, the data and empirical results will be reported and analyzed. A
conclusion will be made in the last section.
2. Literature Review
There have been several studies examining the determinants of exchange rates for Croatia or related
countries. Baharumshah and Borsic (2008) study purchasing power parity (PPP) for 13 Central and
Eastern European countries and find that PPP is valid for Croatia if either the U.S. dollar or the euro is
used. Tkalec and Vizek (2011) shows that absolute purchasing power parity holds for Croatia in the
long run, suggesting that the exchange rate is in accord with the fundamentals. They also report that
exchange rate pass-through to the domestic consumer price is not confirmed. Miteza (2012) examines
PPP for 6 Central and East European countries and finds that PPP is confirmed for four of six countries
and that the is very strong evidence of PPP for Slovakia, Poland and the Czech Republic. Kozul (2013)
2
Yu Hsing
ISSN: 2303-6044
tests whether PPP applies to the Croatian kuna/euro exchange rate based on ADL and Engle-Granger
tests and finds that PPP does not hold for Croatia.
Funda and Lukinić (2008) indicate that the Balassa-Samuelson effect in Croatia is not confirmed and is
not expected to become an obstacle to satisfying the convergence criteria. Erjavec, Cota and Jakšić, S.
(2012) reveal that the main reason for the volatility of the Croatian kuna exchange rate comes from
demand shocks instead of supply shocks in the short run and long run. Hence, the exchange rate serves
as a shock absorber.
To the author‟s best knowledge, few of these studies have applied demand and supply analysis in
foreign exchange markets to determine the HRK/USD exchange rate in the short run. Monetary models
of exchange rates are based on the validity of purchasing power parity in the long run. In addition to
interest rates or stock prices, exchange rates may be affected by other variables. This paper attempts to
examine the HRK/USD exchange rate based on a simultaneous-equation model. The demand for and
the supply of the U.S. dollar versus the Croatian kuna are considered simultaneously in determining the
equilibrium HRK/USD exchange rate. A study of the determinants of the HRK/U.S. dollar exchange
rate would provide policymakers with more insights into the behavior of the kuna and other currencies.
3. Methodology
We can express the demand for and supply of the U.S. dollar versus the Croatian kuna in the foreign
exchange market as:
USD d  A( , Y HR , RUS , E US ,  e )
(1)
−+ +
+ +
US
HR
USD  B( , Y , R , E HR )
(2)
s
++
where
USDd
USDs
ε
YHR
RUS
EUS
εe
YUS
+
+
= demand for the U.S. dollar,
= supply of the U.S. dollar,
= the HRK/USD (Croatian kuna/U.S. dollar) exchange rate,
= real GDP or income in Croatia,
= the real interest rate in the U.S.,
= the real equity or stock price in the U.S.,
= the expected HRK/USD exchange rate,
= real GDP or income in the U.S.,
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RHR
EHR
ISSN: 2303-6044
= the real interest rate in Croatia,
= the real equity or stock price in Croatia.
We expect that the demand for the U.S. dollar has a negative relationship with the HRK/USD exchange
rate and a positive relationship with real GDP or income in Croatia, the real interest rate in the U.S., the
stock price in the U.S., and the expected HRK/USD exchange rate. The supply of the U.S. dollar is
expected to be positively associated with the HRK/USD exchange rate, real GDP or income in the U.S.,
the real interest rate in Croatia, and the stock price in Croatia. As real GDP or income in Croatia rises,
Croatians tend to import more goods and services from the U.S. and increase the demand for the U.S.
dollar. When real GDP or income in the U.S. rises, Americans tend to import more goods and services
from Croatia and increase the supply of the U.S. dollar in exchange for the Croatian kuna. A higher real
interest rate or stock price in the U.S. tends to attract Croatians to invest in these financial assets and to
increase the demand for the U.S. dollar. On the other hand, a higher real interest rate or stock price in
Croatia tends to attract American investors to buy these financial assets and increase the supply of the
U.S. dollar in exchange for the Croatian kuna.
Solving for the equilibrium values of the two endogenous variables simultaneously, we can express the
equilibrium exchange rate as a function of all the exogenous variables:
  f ( RUS , R HR , Y US , Y HR , E US , E HR ,  e )
(3)
Comparative static analysis shows that a change in any one of the exogenous variables is expected to
have an impact on the equilibrium HRK/USD exchange rate
 / RUS   ARUS / J  0
(4)
 / R HR   BR HR / J  0
(5)
 / Y US   BY US / J  0
(6)
 / Y HR   AY HR / J  0
(7)
 / E US   AEUS / J  0
(8)
 / E HR   BE HR / J  0
(9)
 /  e   A e / J  0
(10)
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where J  ( A  B ) is the Jacobian for the endogenous variables and has a negative value.
Note that in the monetary models based on the equilibrium condition in the money market, the sign of
the interest rate differential between Croatia and the U.S. may be positive or negative, depending upon
whether the Bilson (1978) model or the Dornbusch (1976) and Frankel (1979) models would apply.
Furthermore, the traditional view suggests that an increase in the interest rate would cause a currency to
appreciate whereas the revisionist view shows that a higher interest rate would cause a currency to
depreciate due to a higher default probability, a weaker financial position of firms that are debt
constrained, and a higher exchange rate risk premium (Huang, Hueng and Yau, 2010).
4. Empirical Results
The data were collected from the International Financial Statistics, which is published by the
International Monetary Fund. The HRK/USD exchange rate measures units of the kuna per U.S. dollar.
Hence, an increase means an appreciation of the U.S. dollar or a depreciation of the Croatian kuna. The
real interest rate in the U.S. is represented by the real 10-year government bond yield minus the
inflation rate in the U.S. Due to lack of data for the government bond yield, the real interest rate in
Croatia is represented by the government bond yield in the euro area minus the inflation rate in Croatia.
Real GDP in the U.S. or Croatia is an index number measured at the 2005 year. The expected exchange
rate is represented by the average HRK/USD exchange rate of past four quarters. The stock price in the
U.S. is represented by the share price in the U.S., and the stock value in Croatia is measured by the
share price in Croatia. The sample consists of quarterly data ranging from 1997.Q3 to 2013.Q4 and has
a total of 66 observations.
The ADF test on the regression residuals is employed to determine whether these time series variables
are cointgegrated. The value of the test statistic is estimated to be -3.3381, which is greater than the
critical value of -2.6016 in absolute values at the 1% level. Therefore, these variables have a long-term
stable relationship.
Table 1 presents estimated coefficients and other related statistics. The EGARCH method is applied in
empirical estimation in order to yield a positive conditional variance without restriction on the
parameters. As shown, 90.53% of the change in the equilibrium HRK/USD exchange rate can be
explained by the right-hand side variables. Except for the coefficient of the real government bond yield
in the euro area, other coefficients are significant at the 1% level. The equilibrium HRK/USD exchange
rate is positively associated with the real 10-year U.S. government bond yield, real GDP in Croatia, the
real stock price in the U.S., and the expected exchange rate. It is negatively affected by real GDP in the
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ISSN: 2303-6044
U.S. and the real stock price in Croatia. The negative coefficient of the real government bond yield in
the euro area is insignificant at the 10% level.
Several comments can be made. It appears that the coefficient of any variable for the U.S. is greater
than the coefficient of the corresponding variable for Croatia in absolute values. A 1 percentage-point
increase in the real 10-year U.S. government bond yield would raise the HRK/USD exchange rate by
0.1034. A 1 unit increase in U.S. real GDP would reduce the HRK/USD exchange rate by 0.0071
whereas a 1 unit increase in the Croatian real GDP would raise the HRK/USD exchange rate by 0.0021.
A one unit increase in the stock price index in the U.S. would increase the HRK/USD exchange rate by
00130 whereas a one unit increase in the stock price index in Croatia would reduce the HRK/USD
exchange rate by 0.0048. If the expected exchange rate rises by 1, the actual exchange rate would
increase by 0.7563.
Table I. Estimated Regression of the HRK/USD Exchange Rate
Dependent variable: HRK/USD exchange rate
Real 10-year U.S. government bond yield
Real euro government bond yield
Real GDP in the U.S.
Real GDP in Croatia
Real stock price in the U.S.
Real stock price in Croatia
Expected HRK/USD exchange rate
Constant
R2
Mean absolute percent error
Sample period
Number of observations
Methodology
Coefficient
0.1034
-0.0065
-0.0071
0.0021
0.0130
--0.0048
0.7563
1.0161
z-statistics
20.0003
-1.4698
-21.5008
3.4653
16.8446
-22.7988
70.8176
6.7125
0.9053
4.3680%
1997.Q132013.Q4
66
EGARCH
Notes: Except for the coefficient of the real euro government bond yield, other coefficients are significant at the 1% level.
HRK stands for the Croatian kuna.
Several other versions are tested to determine whether the results may change. If the real euro
government bond yield is replaced by the real deposit rate in Croatia, its coefficient is negative but
insignificant at the 10% level. The R2 value of 0.9055 is very similar to the R2 value of 0.9053 as
reported in Table 1. Except for the real government bond yields with negative values, when the log
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form is used, only the coefficients of the real U.S. government yield and the real stock price in Croatia
are significant whereas other coefficients are insignificant at the 10% level.
5. Summary and Conclusions
This paper has examined the determinants of the HRK/USD exchange rate in the short run based on a
simultaneous-equation model consisting of the demand for and supply of the U.S. dollar. A reducedform equation is estimated by the EGARCH method. The paper finds that a higher real U.S.
government bond yield, a higher real GDP in Croatia, a higher real stock price in the U.S., and a higher
expected exchange rate would raise the HRK/USD exchange rate whereas a higher U.S. real GDP and a
real higher stock price in Croatia would reduce the HRK/USD exchange rate.
There are several policy implications. It seems that demand and supply analysis of exchange rates in
the short run works reasonably well as it can explain approximately 90.53% of exchange rate
movements. The forecast error of 4.368% is relatively small. Interest rates, real GDP, stock prices and
the expected exchange rate in the U.S. and/or Croatia play important roles in exchange rate movements
in the short run. Recent higher real U.S. government bond yields or rising U.S. stock prices tend to
raise the HRK/USD exchange rate. Recent higher real government bond yields in the euro area or
higher U.S. real GDP would reduce the HRK/USD exchange rate. The current weaker economy in
Croatia is likely to put smaller downward pressure on the HRK/USD exchange rate. Relatively stable
stock prices in Croatia tend to stabilize the HRK/USD exchange rate.
6. References
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Tkalec, M. & M. Vizek (2011). Purchasing Power Parity in a Transition Country: The Case of
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Vol. 1(1) / pp.11-28
Alba Cani
Epoka University
Tirana, Albania
[email protected]
Abstract
The banking system in Albania is represented as a consolidated and sustainable system.
Article History
Participation of powerful banking groups in the Albanian market could be seen as a
Submitted: 02 August 2014
positive sign that provides security for the continuation of the growth and development
Resubmitted: 15 August 2014
of this market. However, on the other hand, today's economy is severely affected by the
global financial crisis. The effects of this crisis we can also see in Albanian banking
system. Its impact was felt in every area of the Albanian economy, especially in the
financial intermediaries. The banking system, as one of the leading representatives of
financial intermediaries, is facing numerous difficulties as a result of the financial
crisis. The main purpose of this study is to examine the negative impacts of financial
crises in the Albanian banking sector. Therefore, this paper aims to investigate different
factors such as: injection of abundant liquidity, increased control over the banks of the
second level and pressure to increase transparency of banks and their influence on
current economic situation of the Albanian banking system. This study provides answer
on some research question such as: What are the possibilities for intervention to
prevent the negative effects of the crisis as well as to improve the situation? What are
these interventions and how should be implemented? Is there sufficient capacity for the
banking system to overpass the negative impact of this situation? This study concludes
with the result that the effec of financial crisis are felt in Albanian economy and
banking system but not with the same impact as in developed countries.
Keywords: Financial Crisis; Banking System; Sub-prime Mortgage Nonperforming
Loans EGARCH
JEL Classification: G010, G180, G210
Citation: Cani, A. (2014). The Impact of Global Financial Crisis in the Albanian Banking System. Journal of Social and
Business Studies, 1(1), 11-28.
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1. Introduction
The economy is one of the areas where unexpected developments occur with high rates. Today the
global economy is facing problems and challenges that are unusual. The financial crisis has worried
almost all economists. Many questions and problems are solved unanimously, for other questions and
problems there are debates, while for some others no solutions are found. The question that arises is
whether should these crises happen; Are they normal for the global economy or they are artificially
created for geopolitical reasons?!
A popular expression says "the economy without crisis cannot be imagined in the same way as
Christianity cannot be perceived without hell." The arguments for the presence of crises are different
but we are interested to exit as soon as possible from this situation. Many countries have taken
measures to prevent negative effects on their economies or at least to minimize these effects. It is seen
that some countries have intervened in the right time with appropriate measures while some states have
delayed their decisions. Albania is a country which was not affected directly by the global financial
crisis because Albania is a country not well integrated into global financial markets. This negative side
of the Albanian finances made the effects of the crisis in Albania came indirectly and in a softer way
compared to developed countries. The reduction of remittances, lower consumer spending (more as a
result of panic), the problems of construction market, increased price of fuel and devaluation of the
Albanian Leke against foreign currencies, were some of the first effects of the crisis in the Albanian
economy. In the last quarter of year 2007 and first quarter of 2008 in Albania, economists started to
give their opinions and ideas about the crisis issue. Some solutions were taken ready by developed
countries and should only be implemented. Some other solutions were needed to be adapted to the
Albanian reality. So, from 2008 until now much focus is put to the measures to prevent the crisis
affecting Albanian economy. One of the fields that economists were cautious was the banking system.
The exposition of the Albanian banking system taking into consideration the effect of crisis is the main
issue of this research paper. The methodology used is a thorough study, based on a specialized
knowledge in Accounting and Financial Reporting courses obtained during a period of one year and the
Finance-Accounting courses and knowledge obtained during a three year period, as well as material
and theoretical studies important in the field of economy. The paper was prepared on the basis of
statistical data and uses a narrative approach, and comparative analysis regarding the problems and
effects of the crisis in the banking system.
The paper is organized as follows: the first section gives a thorough study for the global financial crisis
being followed by the financial crisis and central banking. The third part includes a study done for the
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effects of this crisis in Albanian Banking sector. Finally, conclusions and recommendations are given
regarding the research papers‟ topic.
Globalization is viewed as the integration of the world in a single village where economic, political and
events that occur in one part of the world affect people in other parts of the world (Okeke, 2010).
According to Hausler (2002) globalization has to do with liberalization and integration of economies
including investment and trade, which has influenced financial and capital markets in the last decades.
In the findings of Balino (2000) the deregulation of banking activities was caused by the globalization
of finance.
Leyshon (1995) has found that liberalized financial markets are the source of increased financial assets
related with allocation of financial resources. Adei (2004) states that globalization has increased
chances for growth and development in some areas but there has been an increase in inequality
experienced especially by developed countries where Albania is part of this developing countries.
Based on different studies the financial crises is an immediate unexpected drop in the value of financial
assets owned by financial institutions.
Sanusi (2010) discovered that there are different factors that trigger the financial crisis such as:
negative investments ideology associated by fear or panic. This situation of fear and panic causes
further withdrawal of money from investors thus leading to increasing declines. Moreover, financial
networks and markets become unable to function and then collapse. According to Adamu (2010)
financial crisis shows its first signs when some financial institutions or assets lose a large part of their
value. Different scholars in the field of economics and finance have predicted the negative economic
effects before the current global financial crisis was spread in different parts of the world.
Minsky (1995) has cited that global financial integration is associated by the era of expansive
capitalism. Pettifor (2003) concluded that the credit expansion is fueled by the financial sector
expansion. This situation has initiated the creation of the “credit bubble” which has financed bubble in
assets, stocks, shares and property. According to Stiglitz (2010) the great recession of 2008 is
considered to be a complex issue and the causes of this crises were: underwriting standards for subprime mortgages; flaws in credit rating agencies as well as risk management weaknesses at some large
U.S and European financial institutions.
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3. The Global Financial Crisis
The term financial crisis is used to describe a wide range of situations in which some financial
institutions immediately lose a large part of their value. During a financial crisis, the unemployment
rate increases within a short period of time as many factories and production lines shut down
unexpectedly. Banks suspend many of these credits and loans resulted in nonperforming loans. Prices
fell everywhere, certainly influenced by the stock exchange market.
Many economists have offered their theories how the financial crises arise and evolve, what are their
causes and effects as well as ways to prevent them. However, researchers have not yet reached a
consensus on these issues and financial crises still represent a common phenomenon in the world
economy. The biggest financial crisis in history is considered the Great Depression in 1929 which
ended in 1945 based on statistical data.
Who were the causes of the crisis?
The financial crisis happened because of funding and acquisitions in the real estate, especially in the
housing sector. Actors of the crisis were individuals in the United States of America, who were
motivated by high prices of houses and got credit for buying them. The motivation for these purchases
of houses was based on the belief that over time, real estate prices would continue to rise, so a property
bought today would have a higher value a few months later, even if no investment was made on it.
Therefore, more and more buyers entered the market by raising the prices that were initially very high.
Another group of actors in this crisis were international financial institutions, which made capital
available in the form of credit for those individuals interested in real estate. The problem here is
doubled: primarily they attracted buyers with loans, the interest of which was initially very low, and
then went to another extreme of growth. The fact of increasing interest rate normally would have been
a problem for buyers, but their belief that they would be able to sell their properties for a higher price in
a very short period of time eliminated this concern from their minds. Secondly, banks gave credit not
only to qualified individuals based on their profile and revenues but also to those who clearly had a
higher risk profile, as they were unemployed or did not have a certain level of income to ensure paying
the loan. Naturally, it is surprising that how institutions like banks that have whole departments for
credit risk analysis, granted loans to these kinds of persons.
The explanation is as follows: Firstly, the mentality of increased prices was available even for the
banks, which believed that if individuals for one reason or another cannot make their payments, they
will be able to receive real estate and sell with higher prices, providing capital and principal and their
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profits. Secondly, banks took an unusual step, by buying insurances regarding these loans, with the idea
that if the housing market demolished, they will get back the money that they had previously lent. This
brings us to the third group of actors of the financial crisis: the insurance company.
The concept of insurance companies works because even though insurance as a form of security were
purchased by many individuals or companies, only a few of them in fact need to use these insurance
plans. In this case, exactly the opposite happened. Housing prices which were grown without any basis
for the development of real estate burst like a bubble, engendering the financial crisis. The first
bankruptcy occurred to a mass of people, who may not be able to resell their homes, soon followed by
the failure of insurance companies, which were forced to pay according to contracts of banks.
The global financial crisis is not reflected in the same way in the whole economies of the countries
because of the different characteristics of the organization of the financial system and the economic one
of each country.
The financial crisis and central banking
Some years ago, in some countries central banking defined the appropriate level of short-term interest
rates in order to have a desired rate of inflation. Now everything is more complicated. The emergence
of the credit crisis has caused central banks to inject enormous amounts of liquidity in their banking
systems to support lending to the economy to limit recession. In different situations, they had to
cooperate with respective governments to recapitalize banks, which otherwise would have gone
bankrupt, causing a huge economic imbalance than that currently experienced. However, if the
assumptions are not completely wrong, it seems clear that the situation will not be as severe as during
the Great Depression, when the GDP in the United States fell by 25% during 1929-1932.
According to forecasts, in 2010 the world GDP marked the highest value that has been seen ever. There
is a clear movement of income from rich people to poor ones, and so far China has shown a very good
performance. The current recession has affected the private sector and particularly financial sector. The
main Cause include excessive optimism on the progress of ongoing economic growth which led to the
underestimation of credit risk by banks, other lenders and investors. In the United States, it seems clear
that the performance of subprime mortgage loans, which were expected to bring profits also enabling
the poorest people to possess a house, went out of control. However, there were other reasons, mainly
related to the management of banks and other financial institutions. The uncertainty on the extent of the
recession has been high, because it is caused by malfunction of the overall financial sector, which is
central to the economy and it is assumed that it provides access to the means of payment and allocation
of limited resources to the most productive uses.
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If something is not progressing in this industry, it is likely that the consequences be much more severe
than in the case of problems in other sectors.
The primary objective of monetary policy has been to reduce the negative effects caused from the crisis
in the economy. Specifically:

Central banks have granted more loans to commercial banks, to reduce the pressure of the credit
contraction and to assist in the process of granting new loans. To achieve this, the central banks
have accepted a wider range of assets as collateral. As a result, the central bank balance sheets have
grown enormously.

Central banks introduced new institutional instruments to guarantee international liquidity, despite
weakness in the international networks of commercial banks.

Interest rates were reduced to minimum levels to encourage spending and in particular to reduce the
burden of debts.

In the case of commercial banks threatened by bankruptcy, the governments have provided new
loans aimed at continuance of activity. Experience of Lehman Brothers showed us that
consequences may lead to the bankruptcy of a large financial group.

Revenues from taxes have fallen everywhere and government spending primarily to support banks,
are increased. Consequently, budget deficits are expanded.
Since the beginning of the crisis, banks have received new capital more than 1 trillion dollars, this
figure roughly equal to the total decrease of the value of the assets in the balance sheet. IMF predicts
that the banks will need $ 875 billion to restore report of assets / capital in 25, or 1.7 trillion dollars to
decrease this report in 17. Therefore the process of recapitalizing the banking sector is a complicated
process and needs a long time to be completed.
It is not easy for commercial banks to collect new capital and this for several reasons:

Criteria for securing capital and liquidity will be stronger and tougher than in the past and it will
reduce the rate of return on capital used.

Many of accounting issues that caused uncertainty about the net value of banks are not solved yet.

Some sovereign wealthy funds have lost significant amounts of money by supplying banks with
new capital during the beginning of the crisis. If the economy continues to weaken, then the
government may need to inject more capital to ensure a sustainable economic activity. Despite the
progress of the future of the economy, it is likely that most of the additional capital will come from
retained earnings.
Consequently, this causes the following effects:

Differences between deposits‟ interest rates and bank loans‟ interest rates will be larger than in the
past.
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Alba Cani



ISSN: 2303-6044
Official interest rates will stay low for a long time, to maintain low cost of borrowing.
The opinion of lending banks will remain cautious for a long time.
Banking will be a less competitive form of financial intermediation than in the past and financing of
capital markets will be relatively more important.
International Development
The global economy continued to slow in 2012. Most of developed countries experienced continuous
contraction of GDP during this year, while emerging economies marked moderate growth rates. High
rates of unemployment, the weakness of aggregate demand, the need for fiscal consolidation and
reduction of borrowing of businesses and families have taken the form of a negative spiral for the
majority of developed economies. Financial markets have reflected this difficulty and are characterized
by risk premiums and higher yields. Developing countries have managed to maintain positive growth
values, although the above difficulties have affected the performance of exports and investment flows
to them. Global inflation pressures were generally restrained while remaining aligned to the emerging
economies rather than in industrialized countries.
The growth of the world economy during the second half of 2012, has been positive but at a slower
pace than in the first half of this year. Economic crunch was mostly seen in developed countries,
particularly in the Euro Zone, due to weakness in domestic consumption and investment, condition of
high unemployment, the collapse of the credit system and strong enforcement of strong fiscal reforms.

Emerging economies experienced economic growth in this period, although the pace of their
growth was driven by the decline of external demand and the implementation of restrictive policies
initiated from last year.

World Trade activity was weakened mainly due to the decline of demand for exports from
developed economies.
The performance of global financial markets has been generally positive in the last two quarters of
2012, reflecting the effects of policy initiatives mainly in the Euro Zone and the United States of
America (USA). Actions of the European Central Bank (ECB) as further facilitator of monetary policy,
commitment to purchase unlimited amount of publicly owned bonds in secondary markets,
restructuring of the banking sector in Spain, renovation of financial loan for Greece affected positively
the reliability of investors in financial markets. Rates of return required for state titles in the Euro Zone
declined and the marketing conditions, in almost all segments of the financial market, were improved.
Based on recent developments of macroeconomic indicators, global activity is expected to be recovered
gradually in late 2013 and strengthen this trend during the next year, supported by improved financial
conditions and monetary policies in most developed economies as well as in developing one.
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However, there are a number of risks such as:



The slow implementation of structural reforms in the Euro Zone,
The further contraction of global trade
Geopolitical conflicts and macroeconomic instability in the developed countries continue to be
present.
These factors may adversely affect the financial markets thus delaying the process of global economic
recovery.
Table 1: Some important macroeconomic indicators
Countries / Years
USA
Eurozone
Germany
France
UK
Japan
The change of
GDP
2011
2012
1.8
2.2
1.4
-0.5
3.0
0.7
1.7
0.0
0.9
0.0
-0.5
1.6
Unemployment
Rate
2012
2011
8.1
3.2
11.3
2.7
5.9
2.3
10.2
2.1
7.9
4.5
4.3
-0.3
Inflation Rate
2012
2.1
2.5
2.0
2.0
2.8
0.0
Source: (EUROSTAT, 2013)
4. Methodology
The aim of this study is to give a comprehensive overview of the impact of global financial crisis in
Albania being focused in its banking system. The methodology used for measuring the impact was
based on macroeconomic indicators and all the available official data and statistics were taken from
central institutions in Albania. Reports and statistics were sourced from institutions such as: Bank of
Albania, IMF and Eurostat. In terms of global financial crisis, the study is based on the books of
Mishkin and Marone being the primary sources for research paper. The reports issued from Central
Bank were useful in providing qualitative and quantitative analysis based on reliable data. The
methodology is based mainly on qualitative technique where there is done an analysis and
interpretation of information taken from sources such as: books, Bank of Albania, magazines and IMF.
The paper was prepared on the basis of statistical data and uses a narrative approach, and comparative
analysis regarding the problems and effects of the crisis in the banking system.
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5. Financial Crisis and Banking System
Current situation of the banking system
Nowadays several years after the financial crisis had started even the financial system in Albania has
begun to feel the adverse effects thus causing the banking activity to slow the pace of its development.
The current crisis felt by businesses and individuals has made the banking system in Albania to show
different problems. The increased level of nonperforming loans, lower interest rates of loans or lack of
liquidity are some of the main problems that the banking system has faced. In developing countries like
Albania the economic growth has been comparable to those of developed countries and it can be said
that there are still opportunities as well as economic potential for further development and growth. In
developing countries, as is also Albania, the inflation rate has been higher than in the developed
countries. This is because developing countries have also had a higher economic growth than
developed countries. On the other hand, it can be said that the global financial markets have not shown
stability. They have been highly volatile due to the problems triggered by the economies of Euro Zone
countries regarding to public debt.
The year 2012 has been a challenging year for the economy, for Albanian businesses, families as well
as for decision-making in microeconomic and macroeconomic level. Domestic and Foreign economic
and financial shocks have negatively affected the economic growth but they do not have infringed the
macroeconomic and financial stability of the country. Also, a negative impact in the financial markets
had the slow development of the economy of USA which in turn had influenced negatively the
financial markets of other countries. Albanian economy during 2012 was faced with favorable stroke,
coming from inside and outside environment. However, the economic developments of the year
generally remained within the parameters of economic stability, as in the real sector and the financial
sector. Output growth during the first nine months of the year was 1.6%, which was mainly affected by
increasing the level of services offered while shrinking the manufacturing sector. According to
INSTAT, employment in the economy grew by 0.33% on average; this increase was smaller than that
of 2.1% recorded the previous year.
The Albanian economy has recorded a positive growth of 1.6% in real terms during 2012. This
performance is influenced by the most comprehensive monetary stimulus and the improvement of
external economic and financial environment. Economic activity remains below the potential level
regardless of output growth. The latter is not associated with a general reduction of uncertainty,
affecting consumption and private investment, and consequently the supply and demand for loans.
Therefore, the demand for loans is estimated to be weak and dependent on the performance of slow rate
of economic activity, the uncertainty seen in the projections of the future, as well as on the cautious
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behavior of the banking system in the lending direction. Developments in the financial sector have
reflected the dynamics of the real sector of the economy and credit growth in its historical minimum.
Influencing factors include the lack of healthy demand from business and individuals, and the high
sensitivity to the banking sector to the risk of credit default. The quality of the loan portfolio continued
to deteriorate, as shown by the increase in weight of loans in their total 18.8% versus 22.5% a year ago.
In accordance with the above developments the average inflation resulted in 2% staying within the
limit set by the Bank of Albania. Inflationary expectations remained near the target. Exchange rate
remained generally stable and mitigated the impact of fluctuations in foreign price inflation.
In these conditions, in support of medium-term target for inflation and aiming the reduction of the
negative output gap, the Bank of Albania lowered its interest rate three times during the year, going
down from 4.75% to 4%. By reducing the costs of financing the banking system, the monetary
authority aims to reduce the interest rate of loans and increased consumption and investment in the
economy. Banking system records sound and liquid balance and good capitalization position but it
continues to be characterized by a special care in financing investment. The volume of activity
expanded at lower rates due to slower growth of deposits and significant reduction in the lending rates.
For the banking sector, credit risk represents the most important challenge of the activity, while
exposure of the system to market risks and liquidity risk remains moderate.
Despite the difficult economic context taking into account the financial stability during 2012, some
important indicators of financial health are improved. The banking sector is relatively protected against
the risks of financial markets, exchange rate fluctuations and interest rate. On the other hand, risks
associated with the real sector's ability to repay debt are added. In support of its supervisory functions
the Bank of Albania has further strengthened regulatory framework towards enhancing transparency
and disclosure of information, the quality of bank management and the harmonization of legislation
with the national standards. An investment in the orientation of banks toward strategic plans is done
with focus the domestic economy as well as reducing the problems regarding NPL-s.
The performance of the financial system appears stable and the banking sector is well-capitalized,
liquid and with profit growth indicators. The annual growth in deposits and loans has fallen especially
for the loan case the growth has fallen to low historic levels. Non-bank financial institutions, savings
and credit societies, insurance companies, private supplementary pension companies and investment
fund, have further expanded their activity. Beside the positive developments in the financial system,
credit quality continues to present a major problem for the lending institutions that carries out these
activities in the country.
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In Albania, the banking sector is the main financial intermediate. The level of financial intermediation
in Albania figured out as a ratio of assets of financial system to GDP is at 93.9% in the end of 2012.
The volume of assets of financial institutions rose by 2.9% compared with six months earlier and 7.3%
compared with a year ago. The banking sector remains a key segment of financial intermediation,
whose assets represent about 93.6% of the total assets of the financial system in general and about
87.9% of GDP.
Non-bank financial sector continues to reflect a lower total weight to total financial system. Total assets
of non-bank financial sector represent about 6.4% of the financial system, increasing the weight to 5.3
% for year 2011. This increase is due to the increased number of non-bank financial institutions. In late
2012, the share of non-bank financial sector activity to GDP was around 6%. So, it is clearly noted that
despite the fact that the global economic crisis has affected the Albanian financial system, there has
been an increase in its activity.
Financial crisis and its impact on banking system
Today in everyday people's lives, the word "crisis" has taken a certain sense from which derives any
negative phenomenon in the world economy and also in Albanian economy as well. Negative impacts
of the crisis in the Albanian economy have been and continue to be in different dimensions. This
financial crisis contaminated every country including developed countries or developing one. In this
section of this paper, the impact of the crisis on the Albania banking system is shown.
As mentioned above, this was one of the crises that gave her first signs late in 2007 and in early 2008.
During this period, the global stock markets and financial markets began to suffer reductions in their
values reaching minimum level. These made losses incurred by many companies and financial
institutions to reach stratospheric levels within a short period of time. These losses are estimated to
have been around $ 50000 milliard. Based on current studies and also in the statistical data it can be
said that the main reason for the start of this crisis were problems in the U.S. mortgage loans.
So, the high level of NPL-s caused a lack of liquidity in the banking system and this problem was
spread like the domino effect on financial markets around the world, also significantly reducing
confidence in these financial institutions. Among the main consequences of this crisis in the world
economy we can mention the devaluation of foreign currencies of the respective countries (especially
the dollar after Euro). It gave rise to budget deficits and growing unemployment.
Despite the increasing bank of Lehman Brothers and the consequences being spread in Europe,
withdrawals of bank deposits in the fourth quarter of 2008 in Albania were somewhat surprising.
Ultimately, the banking system was steadily increasing its assets, loans and deposits and with a
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sensitive indicator of the return on assets above the level of 1%. The overall performance of the
economy was also good with a growth rate of over 6% and debt levels under control of the government.
Although Albania has modest financial institutions, this country is feeling the weight of this financial
crisis which has already taken the form of a global economic crisis. Disintegration of our country in
financial markets and the poor financial systems have served as barriers to be protected by strong initial
impact of "credit crisis”. Even though Albanians are under the effects of the crisis, but not in crisis, it
must be realized that they do not enjoy immunity and the consequences cannot be avoided. While the
banking sector is well capitalized and funded mainly by deposits of individuals. Our banking system is
characterized by a low level of lending to the economy.
Among other effects of the crisis we can mention:



Reduction of the volume of international trade.
Reduction in high rates of foreign direct investment (FDI)
Reduction of the level of lending by the banks of the second level and the reduction of remittances
from Albanian emigrants who are part of countries which are hit hard by the economic crisis.
These effects obviously influenced on banking activity:

By reducing their liquidity, then consequently lending. This led to less investment in Albania thus
creating economic crunch.
Another element of the banking crisis which influenced the banking system and finances as a whole
was "panic". People‟s fear of what is going to happen in the future was a concerning issue. So, they
postponed their spending and consumption thus reducing the liquidity of manufacturers making the
economy to enter in the recession period of business cycle.
Consumers were uncertain what is expected to happen in the days that followed. When it comes to their
savings, consumers were very sensitive. This situation stimulated panic in the Albanian market causing
withdrawals of deposits from the respective banks but relatively controlled by the banking system. So,
we can say that all the above problems negatively affected banking system by increasing suspicion in
this system. The majority of banks in Albania are with foreign capital, this capital coming from
countries worst affected by the crisis, such as Greece or Italy.
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Table 2: The weight of total assets and the weight of loans portfolio of banking system in terms of GDP
Indicators
The total of
assets
(in mld leke)
The total of
assets / GDP
(in %)
Total of
Loans / GDP
(in %)
2006
2007
2008
2009
2010
2011
2012
624.3
742.9
834.1
886.3
990.6
1,120.2
1,187.9
70.8
76.8
76.7
77.5
81.0
86.1
87.9
22.4
30.2
36.5
39.3
40.1
40.0
42.7
Source: (Bank of, Albania, The Report of Financial Stability, 2012)
Banks have given credit for investments to small businesses and medium one in order to give them the
chance to be developed further. The analysis that was done to these businesses has been very detailed
and the provision of loans was not based on collateral but on the solvency, management and investment
of these businesses. In Albania, because of high liquidity (approximately 40% of customer deposits
turn into loans) banking sector is independent from international market. Ratio of loans to deposits in
all currencies, for the entire system is increased by 1.1% reaching 54.4% level. This indicator is in
satisfactory level, but gradually rising in the last quarter of this year. If the funding of the loans in the
country would come from the parent banks or funds from international capital markets, the effect of the
crisis would be more sensitive.
The risk of the consequences of the crisis in the medium or long term period remains. Fluctuations in
stock market and general increase of some products can lead to reducing purchasing power and
solvency of borrowers. The banks have flowed abroad approximately $ 1.2 billion in deposits. Official
data show figures of growing "export" in foreign currency that banks collect from Albanians and invest
in abroad banks. NPLs increased significantly and rapidly decreasing the quality of the loan portfolio.
As a result, the profitability indicator measured RoA, worsened as a result of increased expenses for
provisions for loan losses which affected the net result of the system. The high level of loans
denominated in the foreign currency is an additional disturbance for economy, a further problem for the
banking system. Third quarter of year 2008 marks the rise of non-performing loans portfolio of the
banking system increased by 4.3% from 25.2% in the first quarter and 21.6% in the second quarter of
2008. While the indicator that measures the quality of the loan portfolio system with the ratio of
"problem loans / Total loans" was improved even though this improvement was not in significant
levels. This indicator is calculated at 4.1% from 4.3% in the second quarter. Comparability of
indicators that measure the quality of the loan portfolio in the banking system in Albania is in relatively
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good levels, compared with the general level of this indicator in the region. According to the Bank of
Albania, the NPLs result within acceptable standards. According to experts, the problem of loans will
increase because the number of loans granted during the last year has significantly increased. Banks
and banking system have been continuously privileged as a good part of their portfolio was invested in
government securities. The high interest rate of treasury bills and bonds often above deposit interest
rates with the same maturity time, did not only offer liquidity but also the best profits for banks and the
insurance company. This portfolio is 100% sure in terms of the security thus raising the level of
security of banks operating in Albania despite numerous shareholders and connections that these banks
have to European countries.
Although the level of credit in the economy has been growing from year to year, again we can say that
the level of lending remains low compared to western countries which were in the turbulence of the
recent crises. Less than 50% of deposits collected are given as loans for the economy being in this way
at a lower level compared with western countries where economies grant loans with more than 75% of
deposits collected. This low level of lending exhibits less Albanian banks to credit risk. It should be
noted that due to the low level of loans that Albanian banks have granted, they had the luxury of
selecting the best client.
Lack of liquidity is one of the negative effects of the crisis. Banking system was faced with this
phenomenon in late 2008, where as a result of the panic, the public began not only to reduce their level
of deposits but also to withdraw a portion of them. In 2008 there was a drastic decline in deposits. Lack
of liquidity poses not only risk for the banking system but also for the economy as a whole. This brings
less investment and consequently there will be a reduction in the overall level of economic
development of the country, low level of lending leading the economy to recession.
These effects mentioned above are the main ones which affected banking system because almost every
financial indicator (positive indicator of performance) of the banking system experienced significant
reduction.
There are generally two basic types of financial crises where we can mention:


Crisis of currency or exchange rates
The banking crisis and external debt crisis.
In this paper a lot of focus is given to the financial crisis which has several definitions, where the below
findings are mentioned: "Financial crisis is the situation in which the demand for money grows so fast"
or "Financial crisis refers to a situation in which financial institutions or financial assets lose their value
resulting in declining of financial institutions or non-financial institutions."
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It can be said that the banking crisis occurs when the banking system suffers from liquidity problems as
well as when banks have a high level of nonperforming loans. This may lead the bank into bankruptcy.
A bank, in crisis situation necessarily requires the assistance of the state. Generally speaking the
banking crises generally pass in two stages: in the first stage at which banks create a large number of
NPL-s but tries not to report these loans based on reasons of trust, and the second stage which has to do
with the publication, deals with these problems and requires immediate solutions for them. These crises
have existed previously but problems transmitted in the economy probably have been different. During
the years 1980 - 1995 developed countries faced 65 crises with an estimated cost of $ 250 billion.
Finally, it is important to emphasize that financial crises (banking crises) have been inevitable and
economies of different countries coped with these negative phenomena. It is valuable to learn lessons
derived from these countries in order to face less negative consequences in the future. The behavior of
each person and of the banking system as a whole is an essential element for coping and dealing with
crises. "The majority of business failures do not result from the difficult times. The failures are
attributed to the wrong management and the way how difficult times just deteriorate the situation."
6. Banks Balance
2012 – The report of nonperforming loans to total loans resulted in 22.5% in the end of 2012, from
18.8% at the end of 2011.
2013 – In the first months of 2013, non-performing loans is 24%, with a tendency towards
deterioration.
Fund – There are 1 milliard euros of loans reported with problems, where approximately 300 million of
them are considered lost.
7. Conclusion
In conclusion we can say that the effects of the crisis in Albania are felt but it did not have the same
impact as in developed countries. This comes due to the fact that Albania is not well integrated into
global financial markets. But the fact that Albania is not strongly affected by the crisis does not mean
that it will not be affected by its consequences. Among the consequences of the financial crisis in
Albania we can mention the lowering upward rates of economy, increased unemployment, currency
devaluation against foreign currencies, reduction of production and consequently that of exports, the
decline in general business activity and reduced remittances. Those directly affected the performance of
the banking system influencing the increase of the number of loans with problems, the reduced growth
rates of deposits thus causing lack of liquidity in the market and as a result significantly lowering the
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level of lending. Reduction of lending will lead to less investment in the economy, rising
unemployment and many other negative effects on our economy. Fortunately, some steps had been
undertaken which held banking system under control, but on the other hand attention should be shown
in interbank markets as well as for the economy as a whole in this period of crisis.
The particular attention should be paid to human capital. Recruitment for vacant positions in the
banking system should be made based on the ability of the worker and not on subjective factors. This
means that those who become part of the banking system must have appropriate qualifications and
experience. Control systems of the banking system continuously should not only perform periodic
controls but also 'surprise controls "(outside planning controls). So, in this moment the internal audit,
the external one as well as oversight of the Central Bank should be more cautious. If it is necessary, the
banking system must maintain liquidity and additional funding. The attention should be directed toward
immigrants, who are the main suppliers of income. The limit of security deposit should be increased, as
it has also happened in many other countries.
Finally, it should be emphasized that despite the effects of the crisis in the banking system and the
measures that have been taken or not, Albania has potential opportunities for development in this
sector. A better management of all assets and an inter-institutional functioning will make the
performance of the banking system to be constantly increasing.
8. References
Adammu, A. (2010). Social Science Reported Network. The Effects of Global Financial Crisis on
Nigerian Economy .
Adei, S. (2004). Impact of Globalization on Management: The African Perspective. Management in
Nigeria. EUROPEAN Journal of Business and Management, 39/40(21), 20-25.
Balino Tomas, U. A. (2000, June). The New World Banking Finance and Development. Finance and
Development, 41-44.
Bank of Albania. (2008). Financial System Stability in Albania for the second half of the year 2008.
Bank of Albania Statement.
Bank of Albania. (2009). The policies of monetary and financial stability - Lessons learned from the
crisis. The 8th International Conference of Bank of Albania.
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Bank of Albania. (2012). Bank of Albania, The Report of financial stability.
Bank of Albania. (2012). The Report of Financial Stability. Tirana, Albania.
Bank of Albania. (2012). The Report on Financial Stability for the last quarter of 2012.
Bank of Albania. (2012). Bank of Albania, The Report of Financial Stability.
Bank of Albania. The Annual Report.
Bank of Albania. (2008-2012). The Annual Report of Supervision.
Bank of Albania. (2008-2012). The Annual Report of Banking Supervision. Albania
Dervishi, D. (2011). Monografi-Krizat Financiare dhe modeli stress indeks.
EUROSTAT. (2013). EUROSTAT. Retrieved from EUROSTAT.
Hausler, G. (2002). The Globalization of Finance. Journal of Finance and Development, Vol. 39, 10.
IMF. (2009). The implications of the global financial crisis for low income countries.
Kadareja, A. (2012). The Conservatorism of Banks: Zgjedhje e Qellimshme apo e Detyruar prej
ngjarjeve. Bankieri Magazine, No.3.
Kadareja, A., & Meka, E. (2012). The Banking in Albania and its path toward the future. Economicus
9.
Leyshon, A. (1995). Geographies of Money and Finance. Progress in Human Geography , Vol. 19 (1),
531.
Misnky, H. (1995, 29 March). Longer Waves in Financial Relations: Financial Factors in the More
Severe Depressions II. Journal of Economic Issues, 83 – 95.
Mishkin, F. Financial crises and aggregate economic activity. In F. Mishkin, Money Banking and
Financial Institutions, 203-205.
Okeke, M. N. (2010, Jan/Mar). Meeting the Challenges of Globalization. A Focus on Scarlite Industries
Limited. The Certified National Accountant, 18, 39.
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Pettifor, A. (2003). World Socialist Web Site.
Sanusi, L. S. (2010). Global Financial Meltdown and the Reforms in the Nigerian Banking Sector.
Paper presented at Abubakar Tafawa Balewa University.
Stiglitz, J. (2010). Interpreting the causes of the Great Recession of 2008. Eight Bis Annual
Conference.
World Bank. (2008). Global Financial Crisis and implications for the developing countries.
9. Abbreviations
ECB - European Central Bank
IMF - International Monetary Fund
NPLs - Non Performing Loans
USA - United States of America
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Vol. 1(1) / pp. 29-41
Is the Republic of Macedonia “Good Lover”? Republic of Macedonia-NATO-EU Case Study
Biljana Chavkoska
FON University
Macedonia
[email protected]
Abstract
Republic of Macedonia has leaved 20 years of its independence and still steps forward
Article History
realization of its goals: the memberships of NATO and EU. This road was full of
impediments created by political influences by the stronger political partners on the
international scene. One of the most important events in the recent Macedonian history
was signing of the Ohrid framework agreement which put an end to the ethnic conflict
in 2001 and the name dispute with the neighbor Greece. This article aims to analyze the
role of politics versus law in the case of the NATO membership, such as the
implications that this precedent has on the EU membership. In this direction, the author
gives personal opinions and suggestions for improving the future perspectives of
Republic of Macedonia in the love triangle RM-NATO-EU. The final conclusions in the
paper go in benefit of the politics in international relations vis a vis international law.
Thus, Republic of Macedonia has to improve the foreign policy and in the near future
resolve the name issue with Greece on the road to NATO and EU.
Keywords: Independence; Membership; Politics; Law; NATO; EU
JEL Classification: F51 F52
Citation: Chavkoska, B. (2014). Is the Republic of Macedonia “Good Lover”? Republic of Macedonia-NATO-EU Case
Study. Journal of Social and Business Studies, 1(1), 29-41.
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1. Introduction
Republic of Macedonia after its independence in 1991 began to walk on the road towards membership
in international organizations such as United Nations, Council of Europe, North Atlantic Treaty
Organization and European Union. Due to the name dispute with Greece, Republic of Macedonia faced
double standard procedures for membership in international organizations.
First it was the precedent with the United Nation membership under the temporary name the Former
Yugoslav Republic of Macedonia when the country had to fulfill additional criteria. After signing the
Interim Accord with Greece, the country intensified its relation with North Atlantic Treaty
Organization and European Union. It was the first country of the region that signed the Stabilization
and Association Agreement with European Community and the Member States. Twenty years later,
Republic of Macedonia is still facing the challenges of becoming member of European family. Could
the things look differently?
2. Why NATO?
In the time when the world face the ending of the most destroyable war, part of the states who
participate decided to give new dimension to the international relations. Thus, North Atlantic Treaty
Organization or NATO was created with the Treaty of Washington signed in 1949 as a result of the
outcomes of the World War II. This Organization was created with a single aim to achieve permanent
peace and stability in the world based on article 51 of the UN Charter. The number of member states,
through the years, aroused from 12 to the current 26 member states which confirmed the on-going and
dynamic process of NATO enlargement. The first round of enlargement was in 1952 when Greece and
Turkey entered the Alliance thus stabilizing the Southeast part of Europe. Three years later in 1955
Socialistic Republic of Germany became part of NATO and in 1982 this round of enlargement ended
with Spain.
With the fall of the Berlin wall and the dissolution of the Soviet Union after the Cold war, NATO was
prepared to accept new arising democracies thus with its structures guarantying the security and
freedom. For this purpose, in 1994 NATO prepared a special program Partnership for Peace for the
new candidate countries coming from ex-Soviet union or ex-Yugoslavia. This Partnership indicates
that the end of the Cold War era created unique opportunity for stabilizing the Euro-Atlantic area with
the further NATO enlargement with the new democracies. The entering of post communistic countries
in NATO in March 1999 was limited to three countries- the Chex Republic, Poland, Hungary. Seven
countries - Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia and Slovenia - formally became
NATO members on 29 March 2004 with all the benefits and responsibilities that Alliance membership
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entails. The enlargement of the Alliance extends the zone of security and stability in Europe and brings
around 45 million more European citizens under NATO's protective umbrella. The fifth round of
NATO enlargement is by far the largest, involving as many countries as in all four previous rounds. In
the words of NATO Secretary General Jaap de Hoop Scheffer: "It will be a major step towards a longstanding NATO objective: a Europe free, united and secure in peace, democracy and common values."
(Scheffer, NATO, n.d.).
Since 1999, all of these countries have benefited from intensified cooperation under the Membership
Action Plan (MAP), a program for advice, assistance and practical support designed to help the
countries wishing to join the Alliance to meet NATO standards. All Western Balkans countries acceded
to this initiative program-Albania in 1994, Macedonia in 1995, Croatia in 2000, Bosnia and
Herzegovina, Serbia and Montenegro in 2006. Through the Partnership for Peace, the Western Balkans
states have an opportunity to enhance the stability and prosperity of the region. The Declaration
adopted at Riga summit states: “We welcome the efforts of Albania, Croatia, and the former Yugoslav
Republic of Macedonia to prepare themselves for the responsibilities and obligations of membership.
We commend their increasing contributions to international peacekeeping and security operations as
well as their common efforts to advance regional cooperation. At our next summit in 2008, the
Alliance intends to extend further invitations to those countries meeting NATO‟s performance based
standards and are able to contribute to Euro-Atlantic security and stability” (Declaration, 2006). At the
Bucharest Summit, NATO extended the invitation to Albania and Croatia for accession and postponed
the invitation to Republic of Macedonia due to a name dispute with Greece.
The Enlargement process of NATO Organization is based on article 10 of the Washington Treaty
explicitly stating: “Every European country in position to follow the principles entailed in the Treaty
and to stability of the North Atlantic area may become equal member state of NATO Alliance. Any
state so invited may become a party to the Treaty by depositing its instrument of accession with the
Government of the United States of America. The Government of the United States of America will
inform each of the Parties of the deposit of each such instrument of accession”.
In interpreting the meaning of article 10 of Washington Treaty two important elements can be
identified:
1) the European country should follow the principles enshrined in Washington treaty
2) the country should improve the security of North Atlantic area
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3. What was Achieved?
Due to the name dispute with the south neighbor Greece, Republic of Macedonia intensified its relation
with NATO after the signing of Interim Accord in 1995. Till the Bucharest Summit in 2008, Republic
of Macedonia made important reforms and took activities on its road to NATO. In regard to the first
element of the article 10 of the Washington treaty, Republic of Macedonia confirmed the ability to
follow the principles enshrined in the Treaty.
Table 1: What exactly Republic of Macedonia did to follow the NATO principles?
15.11.1995
1999
1999
Republic of Macedonia and NATO Alliance started the cooperation in the Partnership
for Peace thus Republic of Macedonia becomes member of the North Atlantic
Cooperation Council which over the years transforms in the Euro-Atlantic Partnership
Council. Republic of Macedonia commits its participation in the Partnership for
Peace through an annual Individual Partnership Program;
Republic of Macedonia was important partner in the NATO led operation in
Yugoslavia in 1999 and also took an important role in facilitation of the refugee crises
followed after the operation. For many years, Republic of Macedonia has been
providing host nation support to troops of the Kosovo Force (KFOR) transiting the
country regulated with an Agreement for the status of the KFOR on the territory of the
Republic of Macedonia
Part of the Membership Action Plan from 1999 with aspiration for joining the
Alliance. The Membership Action Plan is practical manifestation of the NATO
politics of “open door” of the enlargement process such as the commitment of the
candidate country to follow the principles of the Organization. The key element of the
Membership Action Plan is the Annual National Program for Membership (ANP)
dedicate to political, economic security and law aspects of the preparation for
membership.
Republic of Macedonia and NATO actively cooperate in many areas with special
emphasis of the defense and reforms of the security system, democracy and
institutional reforms;
Source: Georgievski S. Dodevski S., Documents for Republic of Macedonia 1990-2005, Law Faculty, Skopje, 2008, p 819832
From the facts stipulated above, Republic of Macedonia de facto confirmed the obligation of the
country to follow the principles enshrined in the Washington Treaty.
In regard to the second element of the Article 10 of the Washington Treaty, Republic of Macedonia
participated in achieving the peace and stability.
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4. What Exactly Republic of Macedonia Did in Achieving the World Peace and Stability?
In the following table (Table 2), several arguments confirming that Republic of Macedonia influenced
keeping the world peace and stability will be stated.
Table 2: Arguments that Macedonia contribute to keeping world peace and stability
2005
2003-2008
Ohrid,
2007
Republic of Macedonia contributed to the International Security Assistance Force
(ISAF) in Afghanistan. A further combined medical team, formed by the three MAP
countries, was deployed in support of ISAF in August 2005. The country is in the
process of significantly increasing its contribution to ISAF.
The contribution in the operation of NATO Training mission in Iraq focusing on
training and mentoring not combating.
Republic of Macedonia was a host country to the Euro-Atlantic Partnership Council
Security Forum which brought together ministers, senior officials, parliamentarians,
academics, NGOs and journalists from the NATO member states and partner
countries for informal discussions on key security issues. The need for a
comprehensive approach to Afghanistan, a framework for energy security and the
importance of integrating the Balkans into Euro-Atlantic structures was the focus of a
special meeting in Ohrid, 28-29 June.
Thus, Republic of Macedonia fulfilled the conditions for membership of NATO and expected invitation
together with the Albania and Croatia in the next round of enlargement process.
5. What Went Wrong at Bucharest Summit?
Republic of Macedonia together with Croatia and Albania in the context of NATO enlargement process
signed the Adriatic Charter for Partnership. This Charter was strategic document aiming to integrate the
three countries mentioned above in the NATO and supported by the USA. At the Bucharest Summit it
was expected due to the fulfillment of the criteria, the countries participants in the Adriatic group to be
invited to enter the NATO. But, what went wrong for Republic of Macedonia at Bucharest Summit and
why Republic of Macedonia did not received invitation together with Albania and Croatia? In the final
Declaration of the Bucharest summit the member states agreed that: “We recognize the hard work and
the commitment demonstrated by the Former Yugoslav Republic of Macedonia to NATO values and
Alliance operations. We commend them for their efforts to build a multi-ethnic society. Within the
framework of the UN, many actors have worked hard to resolve the name issue, but the Alliance has
noted with regret that these talks have not produced a successful outcome. Therefore we agreed that an
invitation to the Former Yugoslav Republic of Macedonia will be extended as soon as a mutually
acceptable solution to the name issue has been reached. We encourage the negotiations to be resumed
without delay and expect them to be concluded as soon as possible” (NATO, 2008).
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According to this warding of the final conclusions of Bucharest Summit, the invitation for membership
was extended until Greece also agrees with other member states to invite the country in NATO. The
major question that arose after the Bucharest Summit was did or did not Greece veto the membership
of Republic of Macedonia in NATO and can the country appeal Greece for violation of the Interim
Accord signed in 1995? In regard to the first question, when Bucharest summit ended and Republic of
Macedonia did not get an invitation for membership together with Croatia and Albania, it was evident
that hard time is coming. First, Macedonian population was frustrated because the name dispute with
Greece became formal criteria for membership even though Republic of Macedonia fulfilled the
criteria stipulated in article 10 of the Washington Treaty. Republic of Macedonia did not get invitation
for membership because of the objection of one of the member states of NATO. This situation raised
the question is the principle of consensus still valuable when the candidate country has fulfilled the
criteria for membership. The Bucharest Summit seriously put in question the open door enlargement
process of NATO. The principle of open door was introduced to support new rising democracies and to
improve the security in the traditional zone (Elenovski, n.d.).
Still, Republic of Macedonia partly neglect the additional criteria for membership stipulated in the
Membership Action Plan. These criteria include: functioning of the democratic political system based
on market economy, respect of the minority rights in accordance with OBSE guidelines, solving the
disputes with neighbors, fighting corruption and organized crime and military support of the Alliance.
Thus, Greece used the criteria for regional stability and cooperation to put on her side the important
influence of France, Spain and Hungary. The decision to postpone the invitation for Republic of
Macedonia was a result of the political game of the important players on the international scene. For
example, France agreed to send 1100 soldiers in Afghanistan as a support for NATO led operations,
thus joining and supporting the United States of America in this operation. Also, France decided to sign
a contract for sale and purchase of military weapon with Greece costing 4 million dollars.
In regard to the second question, Republic of Macedonia (in official document The Former Yugoslav
Republic of Macedonia) decided to institute proceeding against Greece for violation of article 11 of
Interim Accord signed 13 September 1995. In the appeal, Republic of Macedonia requests the “Court
to order Greece to immediately take all necessary steps to comply with its obligation under article 11,
paragraph 1” and “to cease and desist from objecting in any way, whether directly or indirectly, to the
Applicants membership of the North Atlantic Treaty Organization and/or of any other international,
multilateral and regional organizations and institutions of which Greece is member” (International
Court of Justice, 2008).
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International Court of Justice reached the verdict in the case in the end of the 2011. The verdict of
International Court of Justice is final and cannot be a subject of appeal by the states. After the verdict
is reached the parties are only eligible to ask a) interpretation of the verdict, if the parties don‟t agree
over its meaning or b) if the parties discover some fact of such a nature as to be a decisive factor, which
fact was, when the judgment was given, unknown to the Court and also to the party claiming revision,
always provided that such ignorance was not due to negligence (Frckoski, Tupurkovski, & Ortakovski,
1995).
The verdict of the Court has no binding force except between the parties and in respect of that
particular case. If the Court rules that Greece violate the Interim Accord still it would not mean that
Greece would be force to agree that Republic of Macedonia enters NATO under the temporary name
The Former Yugoslav Republic of Macedonia due to the principle of consensus. The verdict would
have declaratory nature of deciding if Greece violated the article 11 of Interim Accord. But if the Court
rules that Greece violate the article 11 of Interim Accord, it would increase the influence and support
for the Republic of Macedonia on the international scene. It would also increase the international
pressure on Greece to solve the name dispute with Republic of Macedonia and thus would week its
diplomatic position. Solving the name dispute is important for the both states and for the regional
stability and prosperity. It is crucial for the continuing of the euro Atlantic integration of the Republic
of Macedonia.
Every country which violates the obligation under the international law by acting or failure to act and
thus makes damage to other state or international organization is obligate to restitute the damage
(Frckovski, Ortakovski , & Tupurkovski, 1995). Article 1 of the Articles on responsibility of states for
international wrongful acts adopted by the International Law Commission at its 53 session on 3 august
2001 states that “Every internationally wrongful act of a state entails the international responsibilities
of that state” such as article 31 stating that “1. The responsible State is under an obligation to make full
reparation for the injury caused by the internationally wrongful act 2. Injury includes any damage,
whether material or moral, caused by the internationally wrongful act of a State.” (International Law
Comission at 53rd session, 2001). Thus, Republic of Greece under the international law is obligate to
compensate if the International Court of Justice rules that Greece violate the Interim Accord. In the
International law there are several forms of reparation: Restitutio in integrum, money reparation,
satisfaction especially in the nonmaterial damages meaning officially apologies, formally accepting the
wrongful act, responsibility of state leaders (Frckovski, Ortakovski, & Tupurkovski, 1995).
In regard to the NATO membership this would not change the factual situation that the invitation for
membership for Republic of Macedonia is postponed until Greece agree with other member states to
invite the country to join the Union.
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The NATO Summit in Bucharest just confirmed the Thucydides thesis that “The strong do what they
want and the week what they must”. Having in mind that Greece is member state of NATO and EU it
would be difficult for Republic of Macedonia to become member of NATO or EU without solving the
name dispute. Greece also could bloke the EU membership of the neighboring country. So, there are
two possible directions as a final decision for the situation. The first solution is that Republic of
Macedonia despite the fulfillment of the formal criteria would have to solve the name dispute with
Greece as soon as possible and the second is serious debate for the decision procedure for membership
of the country applicant (the principle of consensus) especially in the situation when all formally
required condition for membership are fulfilled. In the situation when the functioning of the principle
of consensus is hardly applicable, every member state could practice its ability to bloke candidate state
such as the case of Republic of Macedonia. In this new constellation of practicing interest and power,
the basic NATO criteria would still be efficient only if the principle of consensus is limited minus one
or minus two (Elenovski, n.d.).
6. First NATO than EU or the Other Way Around?
With the fall of the Berlin wall and the dissolution of Socialistic Federative Republic of Yugoslavia,
European Union created new form of cooperation with the countries from Southeast Europe and West
Balkan countries. The European Union created its own institutional framework for support of the
transition process of the new rising democracies. In June 1999 European Union announced new form
of legal binding with third countries as Stabilization and Association Agreements in compliance with
the widen process of stabilization and association (Petrushevska, n.d.). This process was based on the
necessary changes of the country focusing in general of the rule of law, stability of political institutions,
and free market economy as a precondition for EU membership.
Republic of Macedonia after the independence in 1991, because of the name dispute with Greece,
named its own representative in the headquarters in Brussels in October 1992. Still, the complete
diplomatic relations were realized in December 1995, when Republic of Macedonia opened the mission
in European Union. In April 1997 Republic of Macedonia signed the Agreement for Cooperation with
European Community, such as the agreement for cooperation in the transport and textile. The same
year, the permanent mission of the European Commission in Republic of Macedonia was opened. In
the period from April-November 2000 Republic of Macedonia negotiate for the Stabilization and
Association Agreement. The text of the Stabilization and Association Agreement was approved on the
Summit of the heads of the states and governments of the Member States of the Union held in Zagreb
on 24.11.2000 (COM, 1999). The Agreement was signed in Luxemburg on 9 April 2001 which ended
the negotiating process.
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Stabilization and Association Agreement entered into force on 1 April 2004 after the ratification of all
Member States in the European Union. Republic of Macedonia was the first country from the region
that signed the Stabilization and Association Agreement and clearly focused its path on the road to
European integration. In the period until the Stabilization and Association agreement entered into force,
the Temporary agreement had a legal effect signed on 1 June 2001 (Georgievski, 2004).
One of the most important chapters of Stabilization and Association agreement relating the EU
membership for the Western Balkan countries is the Chapter regulating the regional stability and
cooperation as an additional criteria. Interpreting this term regional stability would mean that Republic
of Greece would invoke Republic of Macedonia to solve the name dispute in regard the integration into
the European Union. This regional stability was clearly defined by the European Union on the
European Council meeting in Köln in April 1997 (Taskovska, 2004).
If we analyze the EU enlargement in 2004 and 2007 when 12 new Member States entered the European
Union it is evident that first this countries became member states of NATO. For the post communistic
countries, the membership in NATO precede the EU membership, thus guaranteeing the fulfillment of
the political criteria (Gotron, 2006). Then the procedure for EU membership continuous by fulfillment
of the economic and law criteria stipulated in Copenhagen in 1993. So, it can be expected that
Republic of Macedonia first enters into NATO thus completing the political criteria and then
continuous its road to EU in fulfilling the law and economic criteria stipulated in Copenhagen. The
NATO membership of the Republic of Macedonia would mean long-term stability and security not
only for the Balkans, but also for the Euro-Atlantic region on the whole and so the commencement of
the finalization of the concept for a Europe, whole, free, and in peace.
The integration of the Republic of Macedonia into NATO is a subsequent challenge for EU integration
of the country. Thus, there is no alternative for Republic of Macedonia except integration in NATO and
EU. The membership in NATO and EU would increase the foreign investments in the country,
multinational companies and middle and small investors. The entrance of the post-Soviet countries in
NATO and EU confirmed the fast economic development and new job vacancies (Miloshoski, n.d.).
NATO enlargement is always one step ahead EU enlargement. If a state succeeds in joining NATO,
certain norms and values have been set and achieved also applicable for EU membership. Greece
already announced that it would veto the EU accession of Macedonia if the name dispute is not
resolved by that time (Jese, n.d.).
The European Union played important role in facilitating the Ohrid negotiation process when the
Framework Agreement was reached to put an end to the conflict. In four years of formal
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implementation, the Macedonian parliament adopted 15 constitutional amendments and 70 new or
revised laws, making the Agreement the founding document of contemporary Macedonia (Savkovich
& Petrovich, n.d.).
Republic of Macedonia was first country of the region to sign Stabilization and Association Agreement
but is still the only country which no accession negotiations have taken place to date. Croatia instead
accelerates the integration process towards EU even though it was the country which signed the
Stabilization and Association Agreement after the Republic of Macedonia. Today, Croatia is full
member of the European Union. Republic of Macedonia expects to start the negotiations. This situation
is a result of a several reasons: Firstly, due to a name dispute with Greece, Republic of Macedonia did
not get an invitation for NATO membership, thus the reforms towards EU slowed down. EU besides
the implementation of the SAA, entailed eight benchmarks or key areas to reform: dialogue between
political parties, implementation of the law on police and anti-corruption legislation, reform of the
judiciary and public administration, such as measures in employment policy and enhancing the
business environment (Europa.eu, 2008).
In 2007 European Community signed an agreement for visa affiliation with Albania, Bosnia and
Herzegovina, Republic of Macedonia, Montenegro, and Serbia. These agreements aimed to facilitate
the visa issuing for short term residence for the citizens of Republic of Macedonia in compliance with
the candidate status and Stabilization and Association Agreement. Republic of Macedonia was the
country with the biggest achievements in the region. Republic of Macedonia signed the Readmission
Agreement with the European Community and the Member States, thus in the period from 01.01.2008
till 30.09.2008, 508 people were send back in the country according to the Readmission Agreement.
The Council of ministers for internal affairs and justice on the meeting in Brussels agreed to adopt
decision for eliminating the Schengen visa barriers for Republic of Macedonia, Montenegro and Serbia
starting from 19.12.2009. The European Commission suggests visa liberalization for one or more
countries to the Council of ministers who acts with 2/3 majority. Then, European Parliament and the
Commission for justice and internal affairs and ministers for foreign policy must comply with the
decision. The final decision was the amendment of the Regulative 539/2001 by the Council of
ministers. In this process, Republic of Macedonia was put in the group with Serbia and Montenegro
even though the country finished the necessary reforms much earlier. Thus, the Republic of Macedonia
was regionalized which can be seen as a step backwards approximation of the EU. Republic of
Macedonia additionally after visa liberalization did not took subsequent measures to explain to its
citizen the real meaning of the visa liberalization and the freedom of movement of citizens, students,
workers, retired person, assailants. This resulted in increased number of Macedonian assailants who left
the country due to the visa liberalization and applied for this status in one of the member states of the
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Union particularly in Belgium. Unfortunately, this raised the question of violence of visa liberalization
regime and introducing restrictive measures towards Macedonian citizens and the freedom of
movement in EU member states. For European Union, increased number of Macedonian appliers for
assail meant that Macedonian institutions are not prepare to control the visa liberalization. Thus, the
skepticism in EU increased over the question of readiness of the Republic of Macedonia to move
forward EU integration. Republic of Macedonia must work hard to eliminate the picture of being “bad
lover” that was created after the problems with the visa liberalization arose. Republic of Macedonia has
no time to lose in improving the picture and damage that already is done. For that purpose the Ministry
for internal affairs intensified the border controls, the controls over agencies for transporting people
and litigate procedures against citizens who act contrary of the EU visa liberalization rules. The
government suggested legislative amendments of the criminal law thus incriminating the abuse of the
visa liberalization regime with the EU member states and signatories of the Schengen Agreement.
7. Conclusion
Republic of Macedonia lives 20 years of its independence full with impediments and challenges. The
biggest temptation in its existence was when the country entered the United Nation under the
temporary name The Former Yugoslav Republic of Macedonia because of the name dispute with the
south neighbor Greece. Fifteen years later in 2008 in regard to the NATO membership the identical
situation repeat again thus Greece confirmed that the stronger and influential countries have the final
role in the international scene. In the present moment, Republic of Macedonia is facing the challenge
of the verdict of the International Court of Justice in the case against Greece, solving the name dispute
with Greece as a condition for NATO and EU membership and accelerating the reform process in
regard EU integration. After the Bucharest Summit, the state institutions of the country were not
motivated because of the last events so were not prepared to follow the visa liberalization difficulties
and certain problems arose. The outcome was raising the EU skepticism towards the deepening of the
country integration process and starting the negotiation for membership. Republic of Macedonia and its
institutions must in future time to be completely prepared for every phase of integration as a step
towards not backwards. Finally, solving the name dispute is the key of the NATO and EU membership
of the country and condition sine qua non for regional stability and security, increasing the foreign
investments, lowering the unemployment rate and growth and development of the country. This was
the case with the last NATO and EU enlargement with the South East European countries and it is
imperative for Republic of Macedonia. Republic of Macedonia must improve the status of bad lover in
international scene in relation with other countries such as the relation with international organization
particularly the NATO and EU. This can be only done by completing the reforms in all EU chapters
and strengthening the relation with NATO. It is very important all political parties in Republic of
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Macedonia to unify in the solving of every challenge that Republic of Macedonia is facing in the
moment or would face in the future time on its way to NATO and EU.
8. References
Blinsky Yaroslav. (1999). Endgame in NATO Enlargment: The Baltic States and Ukraine. Praeger.
COM. (1999). Report from the Commission on the Feasibility of Negotiating a Stabilization and
Association Agreement with the former Yugoslav Republic of Macedonia. Brusels.
Declaration, R. S. (2006). Retrieved 08 31, 2011, from www.nato.int.
Elenovski, L. (n.d.). Macedonia and NATO after Bucharest. Political Thought(6), 63.
Europa.eu. (2008, 03 05). Retrieved from www.europa.eu:
http://europa.eu/legislation_summaries/enlargement/western_balkans/e50028_en.htm
Frckoski, L., Tupurkovski, V., & Ortakovski, V. (1995). International Public Law. Tebernakul.
Frckovski, L., Ortakovski , V., & Tupurkovski, V. (1995). International Public Law. Tebernakul.
Frckovski, L., Ortakovski, V., & Tupurkovski, V. (1995). International Public Law. Tebernakul.
Georgievski, S. (2004). "Reflection on the EU rules in the Macedonian legal order" in Macedonian
French days of law - 200 years Code Civil. Prosvetno delo, 296.
Georgievski, S., & Dodevski, S. (2008). Documents for Republic of Macedonia 1990-2005. Law
Faculty, Skopje.
Gotron, Z. (2006). European Law, Kongresen servisen centar. Skopje: DOO.
International Court of Justice. (2008, 11 17). Press Release.
International Law Comission at 53rd session. (2001, 08 03). Retrieved from
http://untreaty.un.org/ilc/texts/instruments/english/draft%20articles/9_6_2001.pdf
Jese, A. (n.d.). Integration into Euro-Atlantic Structures: A key to regional stability. Political
Thought(22), 65-67.
Miloshoski, A. (n.d.). Macedonian perspectives and challenges. Political Thought(22), 59.
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NATO. (2008, 04 03). Official texts. Retrieved from www.nato.int:
http://www.nato.int/cps/en/natolive/official_texts_8443.htm
NATO Enlargment: Illusion and Reality (Cato Institute Publisher Edition). (1998).
Petrushevska, T. (n.d.). The legal effect of European treaties. Jurist (89), 6-7.
Reflecting NATO Enlargement 2004 and Subsequent Relations with the EU (Kindle Edition ed.).
(2011). Glenn Segell Publisher.
Ruzin, N. (2005). NATO in front of the new challenges and the perspectives of Republic of Macedonia.
Fondation Fridrih Ebert, Skopje.
Savkovich, M., & Petrovich, J. (n.d.). No carrot, why Comply? Political Thought(22), 74.
Scheffer, J. d. (n.d.). Retrieved from NATO:
http://www.nato.int/docu/enlargement/html_en/enlargement01.html
Taskovska, D. (2004). The sun remains a sun. Law faculty, Iustinianus Primus, 57-58.
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Vol. 1(1) / pp. 42-54
Creating Value Added for Leasing Service Customers: Case Study of VB Leasing Bosnia and Herzegovina
Slobodan Vujić
Aida Abduzaimović
VB Leasing BH
University “Vitez” Travnik
[email protected]
[email protected]
Saša Vujić
Ibrahim Obhodaš
[email protected]
[email protected]
Abstract
The leasing company's goal is to develop and maintain its client relations through creating the leasing service
Article History
customer value added, and thus achieve increased business efficiency and an increase in its market share. The
purpose of this study is to analyze the process of creating the customer value added in area of leasing services, as
well as to determine what value added indicates for leasing product customers. In this study advantages and
disadvantages of the leasing package, both from economic and financial aspect of leasing will be presented.
Leasing package development is based on the mutual economic interest of both lessor and lessee. The financial
basis of leasing is financing, i.e. acquisition of given goods without engaging one's own capital and without
entering a classic loan-based relationship. The paper will also discuss types of leasing that are the most frequent in
Bosnia and Herzegovina market. This study will also analyze the present customer satisfaction and their
perceptions about the importance of individual factors affecting customer experience with leasing company. Data
for this study was collected through questionnaires with close ended questions based on the Likert scale from one
to five. Survey was comprised of two parts: the importance of individual elements in dealing with a leasing
company and the present customer satisfactions in dealing with a leasing company. Each part will comprise five
elements. The respondents were requested to rank each element according to its importance in their dealing with a
leasing company. 500 questionnaires were distributed among leasing customers, legal and private persons in
Bosnia and Herzegovina. The research will provide an insight into what affects the creation of the leasing service
customer value added, and how it is reflected on the company's market share.
Keywords: Operational Leasing; Financial Leasing; Service; Customer Value Added; Customer Satisfaction.
JEL Classification: M31, M310
Citation: Vujić, S., Vujić, S., Abduzaimović, A., & Obhodaš, I. (2014). Creating Value Added for Leasing Service Customers: Case
Study of VB Leasing Bosnia and Herzegovina. Journal of Social and Business Studies, 1(1), 42-54.
42
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1. Introduction
Across the world, leasing business has been well known for years, while in B&H it has been
developing only over the last seven to eight years. In the Federation of B&H, leasing company business
is regulated by the Law on Leasing, which entered into force in 2009. The first specialized leasing
company was established in the USA, in 1952, while Europe saw their development a dozen years later
than the USA. „From the economic viewpoint, leasing is a special financing technique, which has
developed into a fairly strong business activity over the past thirty years. Leasing as a financing
mechanism implies trade in products where a customer buys the right to use a given product by paying
a defined periodical price. It is actually a rent, i.e. leasing is a form of renting a given product. The
objects of rent may include technological equipment, machinery, medium-term assets, and different
types of durable consumer goods.”(Backović, 1997, p.278)
There are two basic types of leasing: operating and finance (or capital) leasing. In the operating leasing,
the ownership right over the object of lease is not conveyed. The lessee chooses the object of leasing
himself, and pays the contracted amount for its use to the leasing company. Upon the expiration of the
contracted term of lease, the lessee returns the given asset (car, machine, piece of equipment, etc.) to
the lessor, and the latter can sell it or lease it again in accordance with the remaining service value of
the asset. In the finance lease, the contract provides for gaining ownership over the object of the lease,
though only upon the expiration of the contracted term. The lessee pays monthly installments, and
records the asset on the asset side in its balance sheet, and calculates depreciation on it. The lessor
retains the ownership right over the asset until the last installment, which is the basic guarantee for
paying all the installments.
2. Economic and Financial Bases of Leasing
Leasing is an English word and means renting, letting, granting temporary possession in exchange for
rent. Essentially, the lessee independently chooses the object of lease, which the lessor purchases and
pays for, and grants, to the lessee, the temporary use of it for an agreed-upon period and for a defined
compensation. It implies the distinction between ownership over the asset (the leasing company
remains its owner) and its use (it is used by the lessee). In this way, the asset user utilizes it without
spending its own funds for the acquisition and without gaining ownership over the asset.
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Economic aspect of leasing
The development of leasing package is based on the mutual economic interest of both lessor and lessee.
In essence, it makes it easier for the lessee to acquire the desired equipment that they are unable to pay
for in advance. They obtain the equipment and pay for it within the period of its use. Since it typically
implies the acquisition of costly production equipment, the lessee plans to pay for the equipment out of
the income they gain by its use. If the lease involves a private person, it makes it easier for them to
secure part of funds for its payment over a longer period of time than to secure all the funds in advance
when purchasing it.
Leasing can be defined as a contractual relationship between two parties, the user and the owner of the
assets that form the object of leasing package, whereby the user gains the right to use the assets and in
the same time takes the obligation to make a number of periodical payments to the owner, i.e. the
leasing company, within the leasing period.
In 2012 and 2013, economic trends in the surroundings had a negative impact on local economy,
through the debt crisis overflow from the Eurozone and the region. It resulted in the trend of local
demand weakening, which has been present since 2010, and which has slowed down leasing
companies‟ business activities as well. The crisis impact on the real sector is evident, and the
consequences will inevitably be reflected on the economic environment the leasing companies do
business in over the forthcoming period as well. It also affected the bottom line of leasing companies in
the Federation of B&H which, as of 30/09/2013 amounted to 626.037 thousand KM, which is in turn
by 9.84% or by 68.327 thousand KM lower compared to 31/12/2012. The former amount of assets
refers to six leasing companies, while as of 31/12/2013, the total amount of assets referred to seven
leasing companies (one leasing company was revoked the license for leasing activities).1
1
Data provided by BANKING AGENCY OF THE FEDERATION OF BOSNIA AND HERZEGOVINA „Informacija o
sektoru lizinga Federacije BiH“, Sarajevo, November 2013
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Graph 1: Market share by volume (in 000 KM) – BH Leasing market 2004 – 2013
Source: Author’s own creation based on data by Banking Agency of FB&H
Table 1: Leasing market in B&H by financial volume
TOTAL FIN.VOL. IN1000 €
2012
2013
RATE +/- 2013/2012
VEHICLES
EQUIPMENT
REAL ESTATE
OTHER
TOTAL
TOTAL WITHOUT REAL
ESTATE
79.273,00
26.247,00
6.140,00
0,00
111.660,00
71.178,00
20.734,00
1.538,00
0,00
93.450,00
-10,21%
-21,00%
-74,95%
0,00%
-16,31%
105.520,00
91.912,00
-12,90%
Table 2: Leasing market in B&H by the number of contracts
NUMBER OF CONTRACTS
2012
2013
RATE +/- 2013/2012
VEHICLES
EQUIPMENT
REAL ESTATE
OTHER
TOTAL
TOTAL WITHOUT REAL
ESTATE
4.646,00
882,00
62,00
0,00
5.590,00
3.804,00
490,00
12,00
0,00
4.306,00
-18,20%
-44,44%
-80,65%
0,00%
-22,97%
5.528,00
4.294,00
-22,32%
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Graph 2: Structure of B&H leasing market in 2013
Source: Author’s own creation based on data by the Association of Leasing Companies of B&H
Economic advantages of leasing are expressed through:









creating and increasing trade in leasing services,
employing the leasing company‟s capacity,
labor employment,
creating profit and satisfying interests of owners and investors in the leasing company,
maintaining the lessee‟s credit rating,
higher return-on-capital rate,
faster company‟s development,
increased technological development of the lessee,
depreciation calculation.
However, it is necessary to point to the disadvantages of leasing from the economic aspect. The basic
disadvantage of any leasing package is that it is more expensive than a bank loan.
Financial aspect of leasing
The financial basis of leasing involves financing of given assets acquisition without engaging one‟s
own capital and without entering a classic loan relationship.
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“If a future renter, i.e. lessee does not have a sufficient amount of their own resources or if for some
reason they cannot enter a loan relationship or if they need their own capital for some other needs, they
negotiate the price, term of delivery and other significant related elements with the equipment supplier.
Thereupon, they find a financier (a leasing company or bank that is professionally involved in leasing),
which purchases the equipment for the lessee from the supplier and then grant, to the lessee, its use
through a leasing contract. The entire business operation proceeds in a triangle, with two separate
contractual relationships, as follows: the contract on equipment sales to the lessor between the supplier
and leasing company, and the contract between the leasing company and lessee on renting the
equipment. In this respect, one should have in mind that the object of lease is delivered to the lessee
directly by the manufacturer, i.e. the supplier of the given object of lease.” (Backović, 1997, p. 279)
From the financial aspect, leasing allows the following advantages for the lessee:

A simpler way of obtaining funds for the equipment acquisition. The procedure of applying for and
granting the lease is constantly being made shorter compared to that in banks;

A simplified way of providing guarantee for payment. The object of lease is the instrument of
guaranteeing;


Faster processing of applications for lease compared to bank loans;
Better companies‟ liquidity. When using a lease, the lessee does not engage their own funds, which
in turn allows them to use the existing funds for working purposes and thus increase the company‟s
liquidity;

Tax exemptions.
3. Process of Creating Value Added For Leasing Service Customers
Theoretical bases of satisfaction start from the individual‟s subjective estimate as to whether they are
satisfied with a product or service or not compared to their expectation. “Generally, satisfaction is the
feeling of a person‟s satisfaction or disappointment resulting from the comparison between the
perceived effect (or result) of a product and the expectation. If the effect is smaller than the
expectation, the customer is dissatisfied. If, on the other hand, the effect has met their expectation, the
customer is satisfied. If the effect exceeds expectations, the customer is very satisfied or
delighted.”(Kotler and Keller, 2006, p.144)
In case of the leasing service, the customer satisfaction is accumulated. In the first stage, the customer
defines satisfaction with obtaining the leasing package. They assess and consider expectations in the
process of negotiating the leasing package with actual implementation, and can be more or less
satisfied with it. However, the very process of leasing package is related to the second stage of
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satisfaction, i.e. obtaining the equipment and results of its performance. Although the two processes are
separated (obtaining the leasing package and equipment selection), the customer is significantly
relating the two since they are actually a closely tied process. If the customer is successfully
implementing the leasing package and profitably using the equipment they acquired through the lease,
it is realistic to expect that the customer will be satisfied and achieve the favorable satisfaction. In the
same time, such a customer will regularly pay installments to the leasing company. However, if it
happens that the customer is not satisfied with the equipment‟s performance even through no fault of
the leasing company‟s own, it can be expected that the customer will be less good at fulfilling their
obligations toward the leasing company, either by being late with paying installments or by having
difficulties with regular servicing of their obligations. “People form ties with companies or place them
within the framework of their perception to defined positions. Others possibly see the same companies
in a completely different light.” (Spector, 1961)
The process of creating value for customers in the area of leasing services is related to the development
of customer‟s need for possessing a given piece of machinery or equipment they need for the process of
production or a service activity and, in case of private persons, for personal use. However, the customer
has difficulties with funds needed to purchase the desired asset. In many cases, the customer does not
have a credit rating needed for acquiring the desired asset. In such a case, there is a leasing package,
which allows a fast and efficient acquisition and use of the desired asset. In this way, the customer
obtains value through using the leasing package. It allows a fast and simple way of solving the
problem. Essentially, the true value for the customer is the acquisition of the desired asset and putting it
into use, being aware that their desire was fulfilled owing to the leasing package. In this case, value for
customer is accumulated through, first, being granted the leasing service and, secondly, through
acquiring the needed asset and generating new income and profit. In this way, without the initial value,
i.e. obtaining the leasing service, values-added for customer would not be created in the first place.
“The overall value for customers is the perceived money value of the set of economic, functional and
psychological benefits that customers expect from the given supply in the market.”( Kotler and Keller,
2006, p.141) Loyalty to a single leasing company is increased with the customer‟s satisfaction with the
leasing company‟s services. Customers‟ loyalty to a given leasing company includes permanent
business relations and repeating leasing service purchases, without using another leasing company‟s
services.
This process creates and increases customer satisfaction. However, customer satisfaction is based on
the actual economic satisfaction as their business profitability is increasing. The customer assesses the
leasing package value from the aspect of what it allowed them to achieve. Since many customers,
particularly small and medium-size enterprises do not know enough of leasing package possibilities, it
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is necessary to take an active role toward them. For this reason, the traditional scheme of leasing
company organization should be transformed into a modern, customer-oriented organization.
Figure 1: Models of traditional and modern organization
Source: P. Kotler and K. Keller (2006) „Marketing menadžment“ 12 ed, translation „Data status“, Belgrade, p. 140
The modern leasing company organization should put customers on the top, and they should be
followed, by significance and importance, by front office staff, which have contacts with customers,
conduct negotiations, offer leasing packages and, if possible, fulfill customers‟ desires. Below them,
one should find middle management and back office, whose basic task is to support and serve the front
office staff, so that the latter could serve customers efficiently. At the bottom of the scheme one finds
the top management, whose task is to employ the middle management and support them in carrying out
their tasks in serving the front office staff. In the modern organization scheme, the term „customers‟
have been added to both sides indicating that, besides the front office staff, direct contacts with
customers should occasionally include the middle and top management as well. “In modern marketing
service business, a positive image is more significant compared to product marketing, since attempts
are made to transform the latter from commodity to product.” (Onkvist and Shaw, 1989)
4. Methodology
In order to identify the importance of individual factor effecting customer experience with leasing
company and present customer satisfaction primary research has been conducted.
Primary data were collected through questionnaires with close-ended questions based on Likert scale,
from 1 to 5. The questionnaire comprised two parts: importance of individual elements in dealing with
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leasing companies, and present satisfaction in dealing with leasing companies. Each part of the
questionnaire includes five elements. The respondents were asked to rank, by importance, elements that
affect the creation of leasing service value. The questionnaires were distributed to leasing users, legal
and private persons, across Bosnia and Herzegovina. A total of 500 questionnaires were distributed,
and 446 leasing users filled in and returned the questionnaires.
Leasing service research was conducted with two basic segments of service users: legal persons and
private persons respectively. It included the study of individual elements‟ importance in dealing with
leasing companies, and particularly the present satisfaction in dealing with leasing companies. We
obtained 172 responses from legal persons and 274 responses from private persons. The sample is
sufficiently representative, and the responses can be considered relevant.
4.1.
Importance of individual elements in dealing with leasing companies
For the research purposes, we created two tables from the returned and filled-in questionnaires:
- Importance of individual elements in dealing with leasing companies for legal persons, and
- Importance of individual elements in dealing with leasing companies for private persons.
Both legal and private persons were asked the same questions, and responses could be graded at five
levels (unimportant, slightly important, important, very important and extremely important).
Table 3: Importance of individual elements in dealing with leasing company for legal persons
TERM OF
PAYMENT
SERVICE
QUALITY
RESPONSES
SERVICE
PRICE
(INTEREST
RATE)
NUMBER OF
GUARANTORS
GRACE
PERIOD
TOTAL
NO.
%
NO.
%
NO.
%
NO.
%
NO.
%
NO.
%
UNIMPORTANT
8
4.6%
11
6.4%
7
4.1%
4
2.3%
0
0.0%
30
3.5%
SLIGHTLY
IMPORTANT
18
10.5%
14
8.1%
8
4.6%
5
2.9%
2
1.2%
47
5.5%
IMPORTANT
25
14.5%
30
17.4%
15
8.7%
12
7.0%
15
8.7%
97
11.3%
26
15.1%
34
19.8%
32
18.6%
36
20.9%
25
14.0%
153
17.8%
95
55.3%
83
48.3%
110
64.0%
115
66.9%
130
75.6%
533
61.9%
172
100%
172
100%
172
100%
172
100%
172
100%
VERY
IMPORTANT
EXTREMELY
IMPORTANT
TOTAL
100%
Legal persons ranked the elements by the order of importance (very important and extremely
important) as follows:


grace period (89.6%),
number of guarantors (87.8%),
50



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service price (82.6%),
term of loan payment (70.4%), and
service quality (68.1%).
Private persons formed a somewhat different order of importance (very important and extremely
important) in dealing with the leasing company:



term of loan payment (94.5%),
service price (interest rate) (74.1%),
service quality (73.4%),


grace period (70.9%), and
number of guarantors (41.2%).
Table 4: Importance of individual elements in dealing with the leasing company for private persons
TERM OF
PAYMENT
SERVICE
PRICE
(INTEREST
RATE)
SERVICE
QUALITY
NUMBER OF
GUARANTOR
S
GRACE
PERIOD
TOTAL
RESPONSES
NO.
%
NO.
%
NO.
%
NO.
%
NO.
%
NO.
%
UNIMPORTANT
0
0.0%
10
3.6%
11
4.0%
45
16.4%
10
3.6%
76
5.5%
SLIGHTLY
IMPORTANT
0
0.0%
15
5.5%
7
2.6%
32
11.7%
18
6.6%
72
5.3%
IMPORTANT
15
5.5%
48
17.5%
53
19.3%
84
30.7%
52
18.9%
252
18.4%
VERY IMPORTANT
130
47.4%
93
33.9%
75
27.3%
65
23.7%
64
23.4%
427
31.2%
EXTREMELY
IMPORTANT
129
47.1%
108
39.5%
128
46.8%
48
17.5%
130
47.5%
543
39.6%
TOTAL
274
100%
274
100%
274
100%
274
100%
274
100%
100%
5. Present Satisfaction in Dealing with Leasing Companies
The present satisfaction in dealing with leasing companies was also studied separately for legal and
private persons respectively.
The two tables below present the present satisfaction in dealing with leasing companies:


Legal persons‟ present satisfaction in dealing with the leasing company, and
Private persons‟ present satisfaction in dealing with the leasing company.
Each legal and private person was asked to grade their present satisfaction in dealing with the leasing
company through the following five elements:

application processing speed,
51




ISSN: 2303-6044
simple forms and procedures,
help with submitting the application,
types of collateral, and
additional services.
For each element, the respondents could grade the degree of their satisfaction at five levels: very
dissatisfied, dissatisfied, satisfied, very satisfied, and extremely satisfied.
Legal persons expressed a high degree of satisfaction in their dealing with leasing companies with the
application processing speed (75.1%) – very satisfied and extremely satisfied. Similarly, satisfaction
was expressed with simple forms and procedures (69.2%). The same can be said of the present
satisfaction related to additional services, help with submitting applications, and types of collateral.
Table 5: Legal persons‟ present satisfaction in dealing with the leasing company.
APPLICATION
PROCESSING
SPEED
SIMPLE
FORMS AND
PROCEDURES
HELP WITH
SUBMITTING
APPLICATIO
NS
COLLATERAL
TYPE
ADDITIONAL
SERVICES
TOTAL
NO.
NO.
NO.
NO.
NO.
NO.
RESPONSES
VERY
DISSATISFFIED
3
DISSATISFIED
5
SATISFIED
35
VERY SATISFIED
45
EXTREMELY
SATISFIED
84
TOTAL
172
%
1.7
%
2.9
%
20.3
%
26.2
%
48.9
%
100
%
%
%
%
%
%
5
2.9%
4
2.3%
2
1.2%
7
4.1%
21
2.5%
7
4.1%
4
2.3%
5
2.9%
4
2.3%
25
2.9%
41
23.8%
93
54.0%
101
58.7%
88
51.2%
358
41.6%
56
32.5%
29
16.9%
50
29.1%
55
31.9%
235
27.3%
63
36.6%
42
24.5%
14
8.1%
18
10.5%
221
25.7%
172
100%
172
100%
172
100%
172
100%
100%
Private persons‟ responses about the present satisfaction in dealing with leasing companies are very
interesting. They are the most satisfied (very satisfied and extremely satisfied) with collateral types
(85.4%). It should be pointed out that collateral in the leasing service business includes the very asset
(car, piece of machinery or equipment, etc.) that is leased. Besides, private persons are very satisfied
with additional services (78.1%). They are also satisfied with the other elements: simple forms and
procedures (71.6%), application processing speed (65.7%), and help with submitting application
(62.8%).
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Table 6: Private persons‟ present satisfaction in dealing with the leasing company
RESPONSES
APPLICATIO
N
PROCESSING
SPEED
SIMPLE FORMS
AND
PROCEDURES
HELP WITH
SUBMITTING
APPLICATION
S
COLLATERAL
TYPE
ADDITIONAL
SERVICES
TOTAL
NO.
%
NO.
%
NO.
%
NO.
%
NO.
%
NO.
%
VERY
DISSATISFIED
4
1.5%
8
2.9%
5
1.8%
0
0.0%
5
1.8%
22
1.6%
DISSATISFIED
5
1.8%
8
2.9%
3
1.1%
5
1.8%
12
4.4%
33
2.4%
SATISFIED
85
31.0%
62
22.6%
94
34.3%
35
12.8%
43
15.7%
319
23.3%
VERY SATISFIED
60
21.8%
124
45.3%
83
30.3%
54
19.7%
83
30.3%
404
29.5%
EXTREMELY
SATISFIED
120
43.9%
72
26.3%
89
32.5%
180
65.7%
131
47.8%
592
43.2%
TOTAL
274
100%
274
100%
274
100%
274
100%
274
100%
100%
6. Conclusion
The leasing package development is based on the mutual economic interests of both the lessor and the
lessee. Through the research into leasing services with two basic segments of service users, legal and
private persons, an insight was gained into the importance of individual elements in dealing with
leasing companies.
Based on the private persons‟ responses, the conclusion was reached that the most important element
for these users is the term of payment followed by the service price, i.e. interest rate. Situation is
somewhat different with legal persons. The most important elements for this segment of users include
the grace period and the number of guarantors, followed by the service price.
With respect to users‟ satisfaction with leasing companies‟ services, an interesting insight was gained
in the segment of dealing with private persons. Private persons are the most satisfied with collateral
types required, and in case of leasing it is the object of leasing itself. Legal persons are the most
satisfied with the speed of application processing.
Customer satisfaction is maintained and increased both by the service quality and by various additional
stimulations. It is not enough to carry out the leasing service sale only once. With each customer, new
needs keep arising for acquiring various pieces of machinery and equipment, while they are
traditionally short of investment resources. It is necessary to build and develop proactive marketing,
which is based on occasional contacts with the customer accompanied with the proposal for further use
of leasing package.
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It is necessary to create strong ties with customers, which would be built upon: long-term contracts and
providing more favorable conditions to the customers who sign the long-term contracts, i.e. service the
customer through leasing packages and new equipment acquisition. When assessing the customer
loyalty to the leasing company, one should keep in mind that it is far easier and cheaper to retain the
existing customer than to attract a new one. For these reasons, a leasing company should monitor the
number of lost customers and analyze the reasons for customer dissipation. Proactive marketing should
timely prevent the customer drain and, in the same time, increase customer loyalty to the leasing
company.
7. References
Spector, J., Aron (1961). Basic dimensions of the Corporate image. Journal of Marketing, 25(6), 47.
Agencija za bankarstvo Federacije Bosne i Hercegovine (2013). Informacija o sektoru lizinga
Federacije BiH, Sarajevo.
Backović, E. (1997). Poslovne finansije. Svjetlost, Sarajevo.
Kotler, P. & Keller, K. (2006). Marketing menadžment (12 edition). Prevod „Data status“, Beograd.
Onkvist, Z. & Shaw, J.J. (1989). Service marketing: image and competation. San Jose State University,
Busines Horizons.
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Vol. 1(1) / pp. 55-67
Consumers Perceptions about Packaging Appearance of Meggle, Milkos and Zim Milk Products
Ibrahim Obhodaš
Saša Vujić
[email protected]
[email protected]
Slobodan Vujić
Aida Abduzaimović
VB Leasing BH
[email protected]
[email protected]
Abstract
Purpose of the study is to analyze the design of long-life milk packaging in order to learn how
Article History
packaging affects the market share. The marketing aspect analysis will be conducted on the product
packaging design on the example of three dairies doing business in the BH market. It will attempt to
answer the questions as to which packaging elements consumers focus on, which parts of packaging
they consider to be important. In this context, the paper tests the hypothesis that product packaging
significantly affects the market share. The analysis will deal with the functional aspect of packaging,
its operational aspect, durability, reliability, aesthetic appearance, product noticeability and appeal.
Primary data were collected using survey questionnaires filled in by consumers of the actual
products that were the objects of research. Questions were based on the Likert scale from one to
five. The questionnaires were sent to consumers in the region of Central Bosnia, via e-mail. Out of
the 80 survey questionnaires sent, 30 were returned. The response rate is 50 per cent. The survey
questionnaire included six criteria, and the obtained data will be analyzed using statistical methods
(descriptive analysis, correlation, paired sample t-test). Besides the described primary data, the
analysis will use secondary data of international and local organizations involved in market
analysis. The primary research will provide an insight into what influences consumers, and how
packaging affects the market share.
Keywords: Packaging; Consumer Perceptions; Services; Differentiation Strategy; Marketing
JEL Classification: M3
Citation: Obhodaš, I., Vujić, S., Vujić, S., & Abduzaimović, A. (2014). Consumers Perceptions about Packaging
Appearance of Meggle, Milkos and Zim Milk Products. Journal of Social and Business Studies, 1(1), 55-67.
55
Obhodaš, I., Vujić, S., Vujić, S., & Abduzaimović, A.
ISSN: 2303-6044
1. Introduction
Packaging leaves the first impression on the customer, and it is for this reason that it deserves the full
attention, particularly in case of a new product. Packaging (Kotler, 2006) includes the design and
production of the container or wrapping for a product or service. Packaging may consist of the primary
product packaging, secondary packaging that is thrown away before the product use, and transport
packaging needed for storing, distinguishing and shipping the product. The analysis from marketing
aspect will be conducted on the design of products by companies Meggle, Milkos and ZIM, which do
business in B&H market. Meggle dairy does business in the B&H and international markets. Milkos
dairy operates only in the local, B&H market and has a high market share in the production of milk and
dairy products. ZIM dairy is a local dairy with a lower market share compared to the other two.
Based on the obtained data and statistical analysis, a parallel will be made, which should show whether
the packaging appearance is directly related to the market share or not. The survey questionnaire that
the consumers will fill in will be processed in the statistical data processing software – SPSS.2 The
questions are based on Likert one-to-five scale. The questionnaires were sent by e-mail to consumers in
the middle Bosnia region. Out of the 80 sent questionnaires, a total of 30 were returned (37,5%).
Methods that will be used in analyzing the issue include descriptive analysis and sample comparison
using the t-test (Student‟s distribution). The descriptive statistics implies calculation of arithmetic
means, central tendency, variability measure, measure for data grouping and strength of relations
between the two variables. The research will use the following patterns:
Arithmetic mean of a data set is a sum of their values divided by the number of observations. If the data
set represents the entire data population, the population mean,
expression:
=
, is a parameter given by the
=
where N signifies the population size (Newbold et al., 2010).
A median is the value of middle observation, done in the increasing order. If the sample size, n, is an
odd number, the median is exactly the value of middle perception. If the value, n, is an even number,
the median equals the average of two middle perceptions (Wonnacott and Wonnacott, 1990).
2
SPSS is a statistical package for data processing, which allows a fast and simple way of conducting the desired analysis.
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A mode is a value that appears with the highest frequency. Besides these values, the research will use
standard deviation phenomenon.
. Standard deviation is the deviation from the arithmetic mean of the observed
Coefficient of variation shows how homogenous the tested group is, i.e. how accurate the obtained data
are and whether they can be taken into consideration. For a given random sample of n observations,
with the mean of and standard deviation , selected from the normally distributed population with
the mean , random variable t follows Student‟s t-distribution with n – 1 degrees of freedom if it is
given with the formula (Newbold et al., 2010, p. 290):
t=
2. Analysis of Packaging Design
“Packaging design is the connection of form, structure, materials, color, imagery, typography and
regulatory information with ancillary design elements to make a product suitable for marketing.“
(Klichuk and Krasovec, 2012)
The analysis of product packaging design will be conducted in the way in which product characteristics
are rated with 1 to 5, where 1 means that the product absolutely does not satisfy one of the offered
characteristics, and 5 that it absolutely satisfies one of the offered characteristics.
The analysis will pertain to the following six characteristics (Schoreder, 1999):
1. functional aspect of the packaging
2. operational aspect of the packaging
3. durability and reliability of the packaging
4. aesthetic appearance of the packaging
5. productnoticeability
6. product appeal
These six criteria will reveal consumers‟ views of the packaging of products by the three dairies being
analyzed, and the correlation with their respective market share. In other words, it will show whether
the packaging quality and design is accompanied by the product‟s market share. Questions were sent to
consumers via e-mail. The survey questionnaire comprised six criteria, and the obtained data were
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analyzed using statistical methods (descriptive analysis, correlation, paired sample test – t test). The
survey questionnaire was sent to 80 e-mail addresses, and feedback was obtained from 37,5%.
3. Functional Aspect of the Product
Table 1: Descriptive analysis of consumers‟ views
Functional aspect of
packaging
Pair 1
Meggle
Zim
Pair 2
Meggle
Milkos
Pair 3
Milkos
Zim
Arithmetic mean
N
Std. deviation
4.3333
3.2000
4.3333
3.7000
3.7000
3.2000
30
30
30
30
30
30
.80230
.99655
.80230
.91539
.91539
.99655
Std. Error
Mean
.14648
.18194
.14648
.16713
.16713
.18194
Source: Author’s processing in SPSS 20 statistical software
With respect to the products‟ functional aspect, the conclusion can be reached that products by Meggle
are the most functional, with the average response of 4.333, which means that the respondents
absolutely agree that Meggle product is absolutely functional, with the deviation from arithmetic mean
of 0.803, which is negligible. Respondents somewhat agree that products by MIlkos and Zim are
functional, with the average rating of 3.7 for Milkos and 3.2 for Zim. Deviations are not large, and
therefore these data can be taken as relevant.
In Table 2, we will compare samples, i.e. differences between arithmetic means and standard
deviations. Besides, using the two-tailed t-test we will analyze whether there is a significant difference
between samples.
Table 2: Pairing samples using t-test
Functional aspect
of packaging
Pair 1
Pair 2
Pair 3
Megle
Zim
Megle
Milkos
Zim
Milkos
Paired Differences
t
df
Sig.
(2-tailed)
Mean
St.
Deviation
Std.
Error
Mean
95% Confidence Interval
of the Difference
Lower
Upper
1.13333
1.25212
.22861
.66578
1.60088
4.958
29
.000
.63333
1.18855
.21700
.18952
1.07714
2.919
29
.007
.50000
1.35824
.24798
-.00718
1.00718
2.016
29
.053
Source: Author’s processing in the SPSS 20 statistical software
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By comparing two samples of responses that we received from surveyed respondents and that pertain to
the products‟ functional aspect, we obtained the following results:
P = 0,000 Ɇ to the interval of 0,66578 – 1,60088, and it can therefore be concluded that there is a
significant difference between the functionality of Meggle and Zim products.
P = 0,007 Ɇ to the interval of 0,18952 – 1,07714, and it can therefore be concluded that there is a
significant difference between the functionality of Meggle and Milkos products.
P = 0,053 Ƹ to the interval of – 0,0718 – 1,00718, and it can therefore be concluded that there is no
significant difference between the functionality of Zim and Milkos products.
The research revealed that Meggle products are more functional compared to Milkos and Zim products.
4. Products’ Operational Aspect
Operational aspect of packaging
Megle
Pair 1
Zim
Megle
Pair 2
Milkos
Zim
Pair 3
Milkos
Mean
3.7667
3.2000
3.7667
3.5333
3.2000
3.5333
N
30
30
30
30
30
30
Std. Deviation
.93526
.99655
.93526
1.07425
.99655
1.07425
Std. Error Mean
.17075
.18194
.17075
.19613
.18194
.19613
The products‟ operational aspect, which implies that the product satisfies simplicity for use, produced
average responses, with the highest rating, that of 3.776 given to the Meggle company. Respondents
somewhat agree that the operational aspect is satisfactory in case of Milkos products, with the average
rating of 3.533 and deviation of 1.07425, which is acceptable. The respondents are not certain whether
the operational aspect of Zim dairy products is satisfactory or not, which is proven by the average
response of 3.2 with the deviation of 0.99655.
The responses analyzed in the previous table lead to the conclusion that products by Meggle milk and
dairy product producer are simpler to use compared to those by the two other producers, Milkos and
Zim.
In Table 4, we will compare samples, i.e. differences between arithmetic means and standard
between samples.
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Operational
aspect of
packaging
Pair 1
Pair 2
Pair 3
Megle
Zim
Megle
Milkos
Milkos
ZIM
Mean
Paired Differences
Std.
Std.
95% Confidence
Devia
Error
Interval of the
tion
Mean
Difference
Lower
Upper
t
df
Sig.
(2tailed)
.56667
1.19434
.21805
.12069
1.01264
2.599
29
.015
.23333
1.43078
.26122
-.30093
.76759
.893
29
.379
.33333
1.62594
.29685
-.94047
.27380
1.123
29
.271
Comparison of the two samples of responses that were obtained from surveyed respondents and that
pertain to the products‟ operational aspect yielded the following results:
P = 0,015 Ɇ (does not belong) to the interval of 0,12069 – 1,01264, and it can therefore be concluded
that there is a significant difference between the operational aspect of Meggle and Zim products.
P = 0,379 Ƹ (belongs) to the interval of - 0,30093 – 0,76759, and it can therefore be concluded that
there is no significant difference between the operational aspect of Meggle and Milkos products.
P = 0,271 Ƹ (belongs) to the interval of – 0,94047 – 0,27380, and it can therefore be concluded that
there is no significant difference between the operational aspect of Zim and Milkos products.
The research (Table 4) showed that Meggle products have a better service value than others, though
this value does not significantly differ from Milkos products, and that it differs significantly from Zim
products.
5. Product Durability and Reliability
Packaging durability and
reliability
Megle
Pair 1
Milkos
Megle
Pair 2
ZIM
Milkos
Pair 3
ZIM
Mean
N
Std. Deviation
4.4000
3.8000
4.4000
3.2667
3.8000
3.2667
30
30
30
30
30
30
.62146
.71438
.62146
1.08066
.71438
1.08066
Std. Error
Mean
.11346
.13043
.11346
.19730
.13043
.19730
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Durability and reliability is related to product quality; consequently, the more reliable a product and the
longer its shelf life, the product is of higher quality. Similar to previous statements, respondents rated
products by Meggle milk and dairy product producer the highest, with the average rating of 4.4, and it
can be concluded that respondents absolutely agree that this producer satisfies durability and reliability.
Somewhat lower rating, though not too low, was given to Milkos milk and dairy product producer – it
amounts to 3.8. Same as in the two previous responses, the lowest rating was given to Zim milk and
dairy product producer, and it amounts to 3.3367. Deviations are not high, and range from 0.62 (for
Meggle), through 0.716 (Milkos) to 1.08 (Zim).
Similar to the previous response, in Table 6 we will compare samples. i.e. differences between their
arithmetic means and standard deviations. Besides, we will use the two-tailed t-test in order to analyze
whether there is a significant difference between the samples.
Packaging
durability and
reliability
Pair 1
Pair 2
Pair 3
Megle
Milkos
Megle
ZIM
Milkos
ZIM
Paired Differences
t
df
Sig. (2tailed)
Mean
Std.
Deviatio
n
Std.
Error
Mean
95% Confidence
Interval of the
Difference
Lower
Upper
.60000
1.06997
.19535
.20047
.99953
3.071
29
.005
1.13333
1.30604
.23845
.64565
1.62102
4.753
29
.000
.53333
1.45586
.26580
-.01030
1.07696
2.006
29
.054
Comparison of the two samples of responses that were obtained from surveyed respondents and that
pertain to the products‟ durability and reliability yielded the following results:
that there is a significant difference between durability and reliability of Meggle and Milkos products.
P = 0,000 Ɇ (does not belong) to the interval of - 0,64565 – 1,62102, and it can therefore be concluded
that there is a significant difference between durability and reliability of Meggle and Zim products.
P = 0,054 Ƹ (belongs) to the interval of – 0,0130 – 1,07696, and it can therefore be concluded that there
is no significant difference between durability and reliability of Zim and Milkos products.
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Table 6 analyzed the differences between samples and proved that Meggle producer achieves better
durability and reliability than the others, while this value does not differ significantly between Milkos
and Zim.
6. Products’ Aesthetic Appearance
Aesthetic appearance of packaging
Pair 1
Pair 2
Pair 3
Megle
Milkos
Megle
ZIM
Milkos
ZIM
Mean
N
Std. Deviation
4.4667
3.6333
4.4667
2.0000
3.6333
2.0000
30
30
30
30
30
30
.62881
.92786
.62881
.94686
.92786
.94686
Std. Error
Mean
.11480
.16940
.11480
.17287
.16940
.17287
The surveyed consumers believe that the aesthetic appearance, which leaves the first impression of a
product, among the three offered producers, is by far the best in Meggle milk and dairy product
producer, with the average rating of 4.467 and deviation of 0.6288. The average rating for the aesthetic
appearance of packaging by Milkos producer is 3,63 with deviation of 0.927. Zim milk and dairy
product producer is considered to have poor aesthetic appearance of packaging, with the average rating
of 2 and deviation of 0.94686.
In Table 8, we will compare samples, i.e. differences between their arithmetic means and standard
deviations. Besides, suing the two-tailed t-test we will analyze whether there is a significant difference
between the samples.
Paired Differences
Aesthetic
appearance of
packaging
Pair 1
Megle
Milkos
t
df
Sig.
(2tailed)
Mean
Std.
Devia
tion
Std.
Error
Mean
95% Confidence
Interval of the
Difference
Lower
Upper
.83333
1.17688
.21487
.39388
1.27279
3.878
29
.001
Pair 2
Megle
ZIM
2.46667
1.27937
.23358
1.98894
2.94439
10.560
29
.000
Pair 3
Milkos
ZIM
1.63333
1.49674
.27327
1.07444
2.19223
5.977
29
.000
Source: Source: Author’s processing in the SPSS 20 statistical software
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Comparison of two samples of responses that were obtained from surveyed respondents and that
pertain to the products‟ aesthetic appearance yielded the following results:
that there is a significant difference between aesthetic appearance of Meggle and Milkos products‟
packaging.
that there is a significant difference between aesthetic appearance of Meggle and Zim products‟
packaging.
that there is a significant difference between aesthetic appearance of Zim and Milkos products‟
packaging.
In Table 8 above it was proven that Meggle products have a better aesthetic appearance than those by
the other producers, while Milkos milk and dairy product producer has a better aesthetic appearance of
its product packaging than Zim.
7. Product Noticeability
Packaging noticeability
Pair 1
Pair 2
Pair 3
Meggle
Milkos
Megle
ZIM
Milkos
ZIM
Mean
N
Std. Deviation
4.6333
4.0000
4.6333
1.9333
4.0000
1.9333
30
30
30
30
30
30
.55605
.90972
.55605
.82768
.90972
.82768
Std. Error
Mean
.10152
.16609
.10152
.15111
.16609
.15111
With respect to product noticeability, respondents rated that Meggle is the most noticeable, with the
average rating of 4.6333 and deviation from arithmetic mean of 0.55605. Respondents also agree that
Milkos products are noticeable as well, with the respondents‟ average rating of 4 and deviation from
arithmetic mean of 0.90972. Respondents do not agree with the statement that Zim products
arenoticeable on shelves, since the average respondents‟ rating was 1.933 with the deviation of
0.82768.
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In Table 10 we will compare samples, i.e. differences between their arithmetic means and standard
between the samples.
Packaging
noticeability
Paired Differences
Mean
Std.
Deviati
on
Std.
Error
Mean
95% Confidence
Interval of the
Difference
Lower
Upper
t
df
Sig. (2tailed)
Pair 1
Megle
Milkos
.63333
1.18855
.21700
.18952
1.07714
2.919
29
.007
Pair 2
Megle
ZIM
2.70000
1.02217
.18662
2.31832
3.08168
14.468
29
.000
Pair 3
Milkos
ZIM
2.06667
1.22990
.22455
1.60742
2.52592
9.204
29
.000
pertain to the noticeability yielded the following results:
that there is a significant difference between products‟ noticeability for Meggle and Milkos products‟
customers.
that there is a significant difference between products‟ noticeability for Meggle and Zim products‟
customers.
that there is a significant difference between products‟ noticeability for Zim and Milkos products‟
customers.
Data analysis in Table 10 proves that Meggle products leave a lasting impression at first sight, which
was proven by past studies as well. With respect to Milkos products‟ noticeability, ratings are fairly
high, and it can be concluded that their products are also recognizable in the market. Zim‟s products
were given a very poor rating, and they should put a lot more effort to bring their packaging to the level
of product noticeability.
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8. Product Appeal
Packaging appeal
Megle
Milkos
Megle
ZIM
Milkos
ZIM
Pair 1
Pair 2
Pair 3
Mean
N
Std. Deviation
4.3667
3.8000
4.3667
1.8333
3.8000
1.8333
30
30
30
30
30
30
.80872
.92476
.80872
.83391
.92476
.83391
Std. Error
Mean
.14765
.16884
.14765
.15225
.16884
.15225
Respondents absolutely agree with the statement that products by Meggle milk and dairy product
producer appeal to customers (owing to their external appearance –packaging); the respondents‟
average rating was 4.367, and deviation 0.80872. Respondents also agree that Milkos products appeal
to customers, with the respondents‟ average rating of 3.8 and standard deviation of 0.92476.
Respondents do not agree with the statement that products by the Zim milk and dairy product producer
appeal to customers, with the average rating of 1.833 and standard deviation of 0.83391, which is very
low.
In Table 12 we will compare samples, i.e. differences between their arithmetic means and standard
deviations. Besides, we will use the two-tailed t-test in order to analyze whether there is a significant
difference between the samples.
Packaging appeal
Mean
Paired Differences
Std.
Std.
95% Confidence
Deviatio
Error
Interval of the
n
Mean
Difference
Lower
Upper
t
df
Sig.
(2tailed
)
Pair 1
Megle
Milkos
.56667
1.33089
.24299
.06970
1.06363
2.332
29
.027
Pair 2
Megle
ZIM
2.53333
1.19578
.21832
2.08682
2.97984
11.604
29
.000
Pair 3
Milkos
ZIM
1.96667
1.32570
.24204
1.47164
2.46169
8.125
29
.000
pertain to the products‟ appeal to customers yielded the following results:
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that there is a significant difference between products‟ appeal to Meggle and Milkos products‟
customers.
that there is a significant difference between products‟ appeal to Meggle and Zim products‟ customers.
that there is a significant difference between products‟ appeal to Zim and Milkos products‟ customers.
The research revealed that Meggle products are the most appealing to customers; ratings given to
Milkos milk producer are also very high, while Zim milk and dairy product producer was given very
low ratings and must invest a lot more effort into their packaging to bring it to the average level.
9. Analysis of Meggle, Milkos and Zim’s Market Share in the B&H Market
The research conducted and analysis performed using statistical methods represent consumers‟ views,
i.e. their subjective opinions. For this reason, the following table will present the market share of the
three analyzed dairies and their milk processing over the last five years.
Table 13: Dairies‟ market share in (000) liters
Dairies
Milkos
Meggle
Zim
2008
6.650
29.700
3.462
2009
9.471
30.351
3.322
2010
21.560
29.125
4.585
2011
19.701
31.998
5.311
2012
16.542
37.389
5.829
Source: Milkprocessingd.o.o. Sarajevo
Graph 1: Dairies‟ market share in (000) liters
40000
35000
30000
25000
Milkos
20000
Meggle
15000
Zim
10000
5000
0
2008
2009
2010
2011
2012
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As we can conclude, respondents‟ ratings correspond to the market share, and we can claim with
certainty that one of the problems and poor market share of the Zim producer and, to a degree Milkos
as well, includes the poor appearance of product packaging.
10. Conclusion
Ratings by 30 surveyed respondents lead to the conclusion that packaging by Meggle milk and dairy
product producer is rated the best.Milkos‟ packaging is somewhat similar to Meggle‟s, according to the
surveyed consumers‟ ratings, although it is not yet at the Meggle‟s level. Packaging (external
appearance) of Zim was rated as the poorest of the three offered producers. Not a single element that
affects the product‟s external appearance was rated nearly as well as those by the two other producers
(as shown by t-test). The analysis conducted in SPSS was presented in the tables above (Table 2, 4, 6,
8, 10 and 12). Comparison of two independent samples and their testing yielded the insight that Meggle
packaging has a far better and more functional appearance than that by the two other producers, while
the test with comparing samples showed that Milkos packaging is more functional and better compared
to Zim‟s. Milkos‟ packaging has all the pre-requisites to compete with Meggle in terms of products‟
external appearance, since the ratings given by the surveyed consumers do differ but not to a degree as
in the case of comparison between Meggle and Zim producers.
Survey results correspond to the producers‟ market share. We can deduce that Zim and Milkos
producers must improve their respective packaging in order to increase their market share. Packaging is
not sufficiently noticeable, high-quality, functional in case of Zim and Milkos producers compared to
Meggle producer, which corresponds to their respective market shares.
11. References:
Kotler, P., et al. (2006).Osnove marketinga. Mate, Zagreb
Newbold, P., Carlson, W.L. & Thorne, B. (2010). Statistika za poslovanje i ekonomiju. Mate, Zagreb,
Rosner K. M . & Krasovec, S.A. (2012). Packaging design, Successful Product Branding from Concept
to Shelf. John Wiley & Sons, Inc, Hoboken, New Jersey.
Schoreder, R.G. (1999). Upravljanje proizvodnjom. MATE Zagreb.
Wonnacott T.H. &Wonnacott R.J. (1990). Introductory Statistics for Business and Economics. New
Jork,
Wiley.
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Vol. 1(1) / pp. 68-82
Nedim Makarević
Embassy of Bosnia and Herzegovina in Pakistan and Afghanistan
[email protected]
Abstract
Developing new methods of handling money transactions online did not mean
Article History
only new way of managing money for clients, but new ways of online robbery as
well. Possibility of stealing money with no physical contact and any tangible
evidence remaining after that is terrifying for clients. The purpose of this paper
was to analyze perceptions of students of Montenegro who were using online
banking, to provide insight into their view points and to create important set of
information for all subjects active in banking industry. Once survey based on six
variables and specific questions assigned to each one of those variables was
ready, results were collected. Survey was completed at high response rate. Even
202 students from Montenegro completed the survey. Results were analyzed and
presented using descriptive statistics. Limitations of this research are relatively
small sample and quite generic approach to problem. Accordingly, suggestions
for future researches would be based on going more deeply into the issue and
analyzing larger samples. Results indicated that students of Montenegro are quite
relaxed when it comes to issue of online banking, and they perceive banks as
reliable in assuring security of handling money and personal information online.
Since there is gap in literature when it comes to research dealing with IT-security
of online banking in Montenegro, this article is not only unique, but it may be
stimuli for new research with different approaches in the future.
Keywords: Perceptions; IT Security; Online Banking
JEL Classification: D82, G2
Citation: Makarević, N. (2014). Perceptions towards IT Security of Online Banking by Students of Montenegro. Journal of
Social and Business Studies, 1(1), 68-82.
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Nedim Makarević
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1. Introduction
For many clients all around the world, handling money with no physical contact is normal every day
activity. Clients are doing this through their personal computers, smartphones or some other devices
that enable them to access their bank accounts and make transactions using internet. This way of
maintaining money with no physical contact and making money transactions is known as “online
banking”. There are many definitions of online banking provided by different researchers. However, all
of those definitions have some common elements. Those elements are all included in the following
definition, provided by Muniruddeen Lallmahamood (2007) who defined internet banking as banking
services over the public network (the Internet), through which customers can use different kinds of
banking services ranging from the payment of bills to making investments. Internet banking or online
banking has created new ways of handling banking transactions for banking related services and for ecommerce related transactions such as online shopping (Lallmahamood, 2007).
However, development of handling money with no physical contact did not provide new opportunities
for clients, but new threats as well. In fact, criminals are able to steal money with no physical contact
and without any tangible evidence remaining after their robbery. Knowing this fact turns on red alarm
in heads of many clients. As banks‟ dependence on new technologies increases, their need to protect
their own assets together with assets of their clients increases as well. This is where importance of IT
security for banks' clients starts. Accordingly, as providers of online banking services, it is of crucial
importance for banks to know awareness level and perceptions of their clients towards IT security of
online banking. Since results of this research will enable banks to learn more about their clients, this
work have potential to be important source of information for consideration by banks in terms of their
planning and development activities. If we consider gap in the literature on this issue in Montenegro,
this article becomes even more valuable.
The survey (prepared for this study) was distributed to clients (students in Montenegro) who are
actively using online banking. It was completed at very high response rate. Even 202 respondents
completed survey from Montenegro. Results were analyzed and presented using descriptive statistics.
The main objective of this paper was to analyze students in Montenegro about IT security of online
banking, to provide insight into their view points and to create important set of information for all
subjects active in banking industry. Students are selected as target group not only because of their need
to use banking services, but because of their increased level of reliance on information technologies.
In the following sections of this work, through theoretical background, all necessary definitions along
with brief historical facts important for understanding this topic will be explained. Accordingly,
information on online banking in Montenegro as country in focus will be provided so readers can be
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Nedim Makarević
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more familiar with the situation in this state. After explaining used methodology, results will be
analyzed, discussed and concluded.
2. Theoretical Background
Muniruddeen Lallmahamood (2007) defines internet banking as banking services over the public
network (the Internet), through which customers can use different kinds of banking services ranging
from the payment of bills to making investments (Lallmahamood, 2007). On the other hand, Jagdeep
Singh (2012) defines internet banking as online systems which allow customers to plug into a host of
banking services from a personal computer by connecting with the bank‟s computer over the telephone
wires. He is also mentioning some synonyms for internet banking such as online banking, PC banking,
home banking or electronic banking (Singh, 2012).
According to Gordon and Loeb (2002), Information security is concerned with the protection of three
characteristics of information: confidentiality, integrity, and availability through the use of technical
solutions and managerial actions (Gordon & Loeb, 2002).
Banks are not only dealing with intangible money transactions, but also with protection of highly
sensitive information such are credit cards' PINs, personal information about the customers, history of
transactions regarding their bank accounts and all other kinds of information that could enable to third
party conducting the criminal activities and making damage for both, customer and bank. According to
Landwehr (2001), weaknesses of banks' information systems are named vulnerabilities, and it is likely
that such vulnerabilities present opportunities for crime by third parties (Landwehr, 2001).
People perceive that electronic handling of money with no physical contact as one of the alternatives to
keep money in safer forms than cash is. This means that almost all transactions can be realized via
different devices including computers, mail or telephone, without physical contact. However, it is
important to bear in mind that online banking resulted in new types of breaking the law and stealing the
assets. Some of them are still new to the legal systems. Beside the physical security systems of banks,
possibility of crime is still very high. Sometimes, in order to keep public image, banks do not even
investigate and prosecute cybercrimes. If they would do that, customers wouldn't deposit money in
their banks (Pfleeger & Pfleeger, 2006). In short, big question emerge in heads of clients: “Is electronic
way of handling money safe?”
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3. Online Banking in Montenegro
Central bank of Montenegro has been established in 2001, and in the same year it started with reform in
its payment system which started to work in 2005. Even though the law on e-banking has been adopted
in 2003, utilization of e-banking services in Montenegro started in 2005. In year 2009, there was eleven
banks operating in Montenegro and all of them are offering e-banking services. In addition to this, in
2004, service center for electronic operations entitled E-MON has been established. The mission of this
center was to provide ability for using e-services to businesses and population in area of Montenegro.
Data of two leading banks in Montenegro indicated that e-banking services are growing and developing
intensively. Research on acceptance of e-banking services by clients of Montenegro showed results
presented in Graph 1 (Dedeić, 2009).
Graph 1: Bank of Montenegro in which clients are either using, or are willing to use e-banking services
Source: Dedeić, 2009
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According to Shrinath (1997), statement that 'information is power' has nowhere been realized more
significantly than in the banking industry. When discussing the risks and challenges for IT security in
that period of time, Shrinath mentioned four risks: unauthorized system/data access by business users
in the bank; unauthorized system/data access by application/system support personnel; unauthorized
system/data access by customers; unauthorized system/data access by the public at large. Since most
people do not realize that large banks are prone to high risk of security breakdown even without going
so far as the Internet, author decided to examine and explain the most critical areas (Shrinath, 1997).
Lawrence A. Gordon and Martin P. Loeb (2002) wrote an article which presents an economic model
that determines the optimal amount of investment necessary to protect a given set of information. Their
model takes into account the vulnerability of information to a security breach and the potential loss if
such a breach occur. After analysis conducted by Gordon and Loeb (2002), they suggested that in order
to maximize the expected benefit from investment in information protection, a firm should spend only a
small fraction of the expected loss due to a security breach (Gordon & Loeb, 2002).
Researchers' efforts to learn about perceptions of users regarding specific technologies resulted with
birth of technology acceptance model. Pikkarainen, T., Pikkarainen, K., Karjaluoto, H., & Pahnila, S
(2004) conducted a study about consumer acceptance of online banking. They investigated online
banking acceptance in the light of the traditional technology acceptance model (TAM). The data for
their results was consisted of group interview with banking professionals, researching TAM related
literature and studies on e-banking. According to their results, perceived usefulness and information on
online banking in the Web site were the main factors influencing online-banking acceptance
(Pikkarainen et al., 2004).
When it comes to explanation of basic concepts involved with system security, introductory chapter of
book entitled „Security in computing “written by Charles P. Pfleeger & Shari Lawrence Pfleeger
(2006) was very helpful. Their book deals with broad range of computer security related topics such
are: cryptography; secure systems development; basic communications technologies; advices on
planning, risk, and policies; Intellectual property; computer crime, and ethics. In short, it is possible to
conclude that this book can serve as great guide to information about computer security attacks and
countermeasures (Pfleeger & Pfleeger, 2006).
Interesting research was made by Luis V. Casalo, Carlos Flavian and Miguel Guinaliu (2007) who
conducted it with purpose to analyze the influence of perceived web site security and privacy, usability
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and reputation on consumer trust in the context of online banking. Their paper described the positive
effects of security and privacy, usability and reputation on consumer trust in a web site in the online
banking context. This study is very interesting and valuable since it proposes link between security,
privacy and trust in the online banking context (Casaló et al., 2007).
Muniruddeen Lallmahamood (2007) explored the impact of perceived security and privacy on the
intention to use Internet banking. He used an extended version of the technology acceptance model
(TAM) to examine the above perception and concluded that while perceived usefulness is a critical
factor in explaining users‟ intention to use Internet banking, it is important to pay attention to the
security and privacy of users‟ Internet banking. According to results, convenience, ease and time
saving are the main reasons for the adoption of Internet banking, whereas security, trust and privacy
appear to be the top main concerns for non-Internet banking users. As author mentioned, this may also
imply that security concerns and privacy protection are perceived to be part of the overall service
provided by the Internet banking services providers, and he suggests that banks should gain customers‟
confidence through raising security levels of the bank (Lallmahamood, 2007).
Many studies that are dealing with evaluation of clients' trust towards banking include „security“ as
important construct. This leads to conclusion that IT security is important for getting customer‟s trust in
banking business. Yap, K. B., Wong, D. H., Loh, C., & Bak, R. (2010) wrote a paper with aim to
examine the role of situation normality cues (online attributes of the e-banking web site) and structural
assurance cues (size and reputation of the bank, and quality of traditional service at the branch) in a
consumer‟s evaluation of the trustworthiness of e-banking and subsequent adoption behavior. One of
their findings in this work stated that web site features that give customers confidence are significant
for promotion of e-banking (Yap et al., 2010).
Mohanad Halaweh (2012) was writing about user perceptions of e-commerce security. In fact, both
online banking and e-commerce are having common characteristics which are based on fact that there
is no physical (face to face) contact between parties involved in transaction, and same technologies are
being used for doing transaction. This means that both of them are exposed to same risks. Accordingly,
these common characteristics were very useful while identifying relevant variables for this study since
some of them are simply modified and used for this research. Results of study conducted by Mohanad
Halaweh (2012) showed that user characteristics, psychological state and intangible security features
have a significant influence on e-commerce security perception. Additionally, in contrast, tangible
security features and cooperative responsibility have a non-significant influence (Halaweh, 2012).
Singh (2012) commented that customers, both corporate as well as retail ones are no longer willing to
queue in banks, or wait on the phone, for the most basic of services. Therefore, electronic delivery of
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banking services is becoming the ideal way for banks to meet their clients‟ expectations. Accordingly,
author got idea to study the scenario of e-banking, so in his study he considered opinions of 100
customers from Ludhiana. The results of this work revealed that people are aware of e-banking, but not
fully. In fact, the Customers are at ease after using e-banking mainly because it saves the precious time
of the customer. It has also been found that Customer satisfaction varies according to age, gender,
occupation etc. (Singh, 2012).
5. Variables & Survey
For conducting this research, with aim to get closer insight into clients' (students) perceptions towards
online banking in Montenegro, six variables were identified as a result of literature review. Those
variables are as follows:
1.1. Privacy aspect - refers to confidence in the technology and online banking service provider
when it comes to protection against privacy issues such are private information of client,
information about money transactions conducted by client, information about client's personal
passwords etc. Pikkarainen et al (2004) stated that as the amount of products and services
offered via the Internet grows rapidly, consumers are more and more concerned about security
and privacy issues (Pikkarainen et al., 2004).
1.2. Control aspect - When it comes to control perspective of IT security, as it is possible to
conclude from survey questions of Yap, K. B., Wong, D. H., Loh, C., & Bak, R. (2010), this
aspect refers to strictness of identity ascertaining when sending messages to client, or doing
transactions by client, but also to general control by bank when it comes to online transactions'
confidentiality (Yap et al., 2010).
1.3. Psychological aspect - According to Halaweh, Mohanad (2012), the psychological aspect of
security incorporates the feeling of fear, the need to feel that one‟s money is secure, and the
ability to control the payment process and performance of online transactions. Even though he
made research about e-commerce, because of same nature of e-commerce and e-banking which
is remote rather than face-to-face, his work was useful for preparation of survey in this study
(Halaweh, 2012).
1.4. Therefore, it is possible to conclude that many customers have the misconception that the use of
e-banking is vulnerable and that there is a high probability that their money will be lost.
1.5. Tangible features - Halaweh, Mohanad (2012) defines tangible indicators as those technological
74
security features of websites that can be checked by users, such as https, padlocks and security
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certificates. Tangible features need to be understood and checked by the customer over the
website rather than captured through social communication; this involves having knowledge and
experience of these features, such as knowing what a security certificate means and how to
check whether it has expired (Halaweh, 2012).
1.6. Intangible indicators - When talking about intangible indicators such are famous website and
reputation, Halaweh, Mohanad (2012) says that they are not seen on the website and cannot be
directly checked over the website. They are affected by society in terms of communication and
the environment: where the customer lives and what they hear from others, as well as their past
experience (Halaweh, 2012).
1.7. Perceived IT security Perceived IT security refers to general perception of online e-banking
services by clients when it comes to IT security.
Accordingly, survey consisted of twenty questions was created. Questions were mainly adapted from
previous researches considering Pikkarainen et al (2004), Casaló, Flavián, and Guinalíu (2007), Yap,
K. B., Wong, D. H., Loh, C., & Bak, R. (2010), Halaweh, Mohanad (2012), Muniruddeen
Lallmahamood (2007). All questions prepared for the survey, along with their references they were
adapted from, are presented in Table 1 available in the next page.
Pikkarainen et al. (2004) conducted group interview with banking professionals in order to learn about
consumer acceptance of online banking (Pikkarainen et al., 2004). Specific questions related to privacy
aspect from his interview were adapted and used in this research to examine clients‟ concerns about
their privacy and security issues in e-banking. Casaló, Flavián, and Guinalíu (2007) made research with
purpose to analyze the influence of perceived web site security and privacy, usability and reputation on
consumer trust in the context of online banking (Casaló et al., 2007). Since they are dealing with
similar issue, questions regarding security and privacy were adapted and used in this study. Yap, K. B.,
Wong, D. H., Loh, C., & Bak, R. (2010) used survey to evaluate trustworthiness of e-banking and
subsequent adoption behavior through several factors (Yap et al., 2010). Accordingly, several questions
helpful to measure control aspect of IT security in e-banking were used in our study. Halaweh,
Mohanad (2012) studied user perceptions of e-commerce security (Halaweh, 2012). Since both ecommerce and e-banking are having the same characteristics such is lack of face to face
communication and physical contact which implies same issues and concerns for final users of such a
services, many questions were adapted from his survey in order to measure psychological aspect,
tangible and intangible indicators, and perceived IT security in general when it comes to online
banking. Also, when it comes to Muniruddeen Lallmahamood (2007), one of questions used in his
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study was useful to adapt for this research when it comes to measuring psychological aspect of IT
security (Lallmahamood, 2007).
Table 3: Review of survey questions
Questions
I trust in the ability of bank to protect my privacy
I am not worried about my personal information given to bank
I think that my bank's information system respects personal data protection laws
I think that my bank's information system will not provide my personal information to other
companies without my consent
I think that my bank's information system respects user‟s rights when obtaining personal
information
I think that bank needs to ascertains my identity before sending any messages to me
I think that bank needs to ascertains my identity before processing any transactions received
from me
I trust that my bank uses security controls for the confidentiality of online transactions
I don't fear when I am using e-banking services
I never have misconceptions about using e-banking services
I don't feel anxious to use e-banking services because of its nature, which involves a lack of
face-to-face communication
I feel safe when I release credit card information through Internet banking
Adapted from
Pikkarainen et al
(2004)
Casaló, Flavián, and
Guinalíu (2007)
Yap, K. B., Wong, D.
H., Loh, C., & Bak, R.
(2010)
Halaweh, Mohanad
(2012)
Lallmahamood,
Muniruddeen (2007)
I don't check the presences of http(s) in the URL when I handle money transactions online
I don't check the small padlock icon on the bottom right corner of the website when I handle
transactions online
I don't check the digital security certificate of the web site when I handle money transactions
online
I would use e-banking services only provided by on a reputable bank
I would use e-banking services only provided by local bank
I think my bank shows great concern for the security of any online transactions
I believe using e-banking services online is secure
Using e-banking services gives me a feeling of security
Halaweh, Mohanad
(2012)
Halaweh, Mohanad
(2012)
Casaló, Flavián, and
Guinalíu (2007)
Halaweh, Mohanad
(2012)
6. Data & Methodology
Data for this study was collected by the means of a survey conducted in Montenegro in 2013. A total of
225 questionnaire forms were delivered to respondents in Montenegro. Surveys were answered with
good response rate, since 202 clients out of 225 completed the survey giving a response rate of 89,7
percent.
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Surveys were filled at universities by students (randomly selected) in Montenegro. This resulted in a
sample that was well distributed in terms of demographic information (e.g. age, and education). The
main reason why students were selected as target for this study is fact that probability of their
involvement in e-banking services is high. As students, usually they are coming from different areas
and they live far away from home. For those reasons, students depend on their parents who are most
frequently using banks to send them money. Considering students studying in 2013/2014 as generation
well familiar with possibilities provided by newly developed technologies that enable using internet
almost everywhere, it was decided to select them as focus of this research. Since it was not difficult to
collect 202 surveys completed by students who are in the same time clients using e-banking services,
this decision seems to be successful.
Data is mainly numerical except demographics part which is categorical. Seven point Likert scale was
used in order to test the agreements of the respondents on six variables through twenty questions. The
collected data is then inserted into an excel spreadsheet and analyzed descriptively. The surveys were
distributed both online and personally. Online version of survey was created, and its link was sent via
e-mail to potential participants.
7. Results
1.1. Demographics
Demographics information includes respondents' department, positions within the department and their
education levels, gender and age. When it comes to gender of Montenegro‟s respondents, there were 106
females and 96 males who replied to the survey. This leads to conclusion that there were more females than
males who participated in this research.
When it comes to educational background of respondents, students of all three cycles of study
(Undergraduate, Master and PhD) have been surveyed. Students of undergraduate degree covered 64,9% of
Montenegro‟s respondents. On the other hand, 28,2% of respondents in Montenegro were Master degree
students. When it comes to PhD students, 6,9% of respondents are of this group. This is in total very low
percentage of PhD students involved in the research. Statistics regarding this is presented in Graph 2.
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Graph 2: Study cycle of students (respondents)
When it comes to departments studied by respondents involved in this study, situation is as presented in
Table 4.
Table 4 – Departments of respondents
Montenegro
Department
Management
Architecture
Education
IT
Economics
Electrical
Engineering
Mathematics
Biology
Total
Number of students
%
62
29
12
29
17
30,7
14,4
5,9
14,4
8,4
24
11,9
6
23
202
3,0
11,4
100
When it comes to ages of respondents, according to Graph 3, it is possible to conclude that most of
them were younger than thirty years, some were between 31 and 40 years of age, while only few were
older than 41.
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Graph 3: Age of respondents
1.2. Survey results
From Table 5, it is possible to conclude that students of Montenegro believe that their bank‟s
information system respects personal data protection laws, and that their privacy is assured.
Table 5 – Privacy aspect
Variable: Privacy aspect
Questions
I trust in the ability of bank to protect my privacy
I am not worried about my personal information given to bank
I think that my bank's information system respects personal data protection
laws
Mean
Montenegro (5,7)
5,5
6,1
5,9
I think that my bank's information system will not provide my personal
information to other companies without my consent
5,3
I think that my bank's information system respects user‟s rights when
obtaining personal information
5,5
Table 6 explains that students of Montenegro are again quite relaxed when it comes to control of their
information, and in the same time they showed trust that banks are using security controls for
confidentiality of online transactions.
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Table 6 - Control aspect
Variable: Control aspect
Questions
I think that bank needs to ascertains my identity before sending any
messages to me
I think that bank needs to ascertains my identity before processing any
transactions received from me
I trust that my bank uses security controls for the confidentiality of
online transactions
Mean
Montenegro (5,3)
5,4
5,2
5,2
When it comes to psychological aspect of respondents, students of Montenegro agreed with the
statements that they don‟t fear when using e-banking services, they don‟t have misconceptions about
using e-banking services, they don't feel anxious to use them, and they feel safe when releasing credit
card information through internet banking (Table 7).
Table 7 - Psychological aspect
Variable: Psychological aspect
Questions
I don't fear when I am using e-banking services
I never have misconceptions about using e-banking services
I don't feel anxious to use e-banking services because of its nature,
which involves a lack of face-to-face communication
I feel safe when I release credit card information through Internet
banking
Mean
Montenegro (5,6)
5,4
5,6
5,8
5,5
There are specific tangible features of online banking that enable clients who are using these services to
evaluate confidentiality of transaction, and to gain specific level of control over them in that way.
Results from Montenegro indicated that their students do not pay too much attention to mentioned
security tangible features such are URL, padlock icon and security certificate of the web site (Table 8).
Table 8 - Tangible features
Variable: Tangible features
Questions
I don't check the presences of http(s) in the URL when I handle money
transactions online
I don't check the small padlock icon on the bottom right corner of the
website when I handle money transactions online
I don't check the digital security certificate of the web site when I handle
money transactions online
Mean
Montenegro (5,6)
5,5
5,7
5,6
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There are intangible assets such is bank‟s reputation that sometimes affect clients without their
awareness. However, it is important to underline that students of Montenegro moderately agreed
(overall mark 5,5) with asked statements. Detailed results regarding this aspect are presented in table 9.
Table 9: Intangible features
Variable: Intangible features
Questions
I would use e-banking services only provided by on a reputable bank
I would use e-banking services only provided by local bank
I think my bank shows great concern for the security of any online
transactions
Mean
Montenegro (5,5)
5,3
5,6
5,5
When it comes to students‟ statement about their faith in security of online banking services, once
more, results indicated that Montenegro‟s students believe to this security. When it comes to another
statement that examined their feeling of security, respondents provided same answer and slightly
agreed with the statement (Table 10).
Table 10: Perceived IT security
Variable: Perceived IT security
Questions
I believe using e-banking services online is secure
Using e-banking services gives me a feeling of security
Mean
Montenegro (5,5)
5,8
5,2
8. Conclusion
This research provided important insights about clients‟ (students‟) perceptions towards IT security of
online banking in Montenegro. Response rate of 89,7% was good in target sample. Students are
selected as a target group for this study for many reasons. Facts that they are mostly studying away
from home, that they are receiving scholarships and that they are generation that was growing up with
internet are enough to justify focus of this research. Limitations of this research are relatively small
sample and quite generic approach to problem. Accordingly, suggestions for future researches would
be based on going more deeply into the issue and analyzing larger samples. This article represents very
unique set of information for the banks already operating in Montenegro, or having tendency to start
business in this country. This research empirically proved that students of Montenegro are quite relaxed
and perceive banks as reliable in assuring security of handling money and personal information online.
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9. References
Casaló, L. V., Flavián, C., & Guinalíu, M. (2007). The role of security, privacy, usability and
reputation in the development of online banking. Online Information Review, 31(5), 583–603.
Dedeić, G. (2009). Elektronsko bankarstvo sa klijentima i za njihov račun; osvrt na bankarski sektor u
Crnoj Gori. Montenegro: University of Montenegro.
Gordon, L., & Loeb, M. (2002). The Economics of Information Security Investment. ACM
Transactions on Information and System Security, 5(4), 438–457.
Halaweh, M. (2012). Modeling user perceptions of e-commerce security using partial least square.
Journal of Information Technology Management, 23(1).
Lallmahamood, M. (2007). An Examination of Individual‟s Perceived Security and Privacy of the
Internet in Malaysia and the Influence of This on Their Intention to Use E-Commerce: Using An
Extension of the Technology Acceptance Model. Journal of Internet Banking and Commerce,
12(3).
Landwehr, C. (2001). Computer security. International Journal of Information Security, 1(1).
Pfleeger, C. P., & Pfleeger, S. L. (2006). Security in Computing (4th ed.). Prentice Hall.
Pikkarainen, T., Pikkarainen, K., Karjaluoto, H., & Pahnila, S. (2004). Consumer acceptance of
online banking: an extension of the technology acceptance model. Internet Research, 14(3),
224–235.
Shrinath, B. (1997). Information Security in Banks. Journal of Financial Crime, 5(1), 65–71.
Singh, J. (2012). Scenario of e-banking in today's life - a survey. International Journal of Computing &
Business Research.
Yap, K. B., Wong, D. H., Loh, C., & Bak, R. (2010). Offline and online banking – where to draw the
line when building trust in e-banking? International Journal of Bank Marketing, 28(1), 27–46.
82
JOURNAL OF SOCIAL AND BUSINESS STUDIES
(Volume 1 / Issue 1 / Sept 2014)
CONTENT
Refereed Articles
1
Yu Hsing
11
Alba Cani
29
Is the Republic of Macedonia “good lover”? Republic of Macedonia-NATO-EU case
study
Biljana Chavkoska
42
Creating Value Added for Leasing Service Customers: Case Study of VB Leasing
Slobodan Vujić, Saša Vujić, Aida Abduzaimović, Ibrahim Obhodaš
55
Consumers Perceptions about Packaging Appearance of Meggle, Milkos and Zim Milk
Products
Ibrahim Obhodaš, Slobodan Vujić, Saša Vujić, Aida Abduzaimović
68
Nedim Makarević
83
CHARACTERISTICS OF THE MONTENEGRIN CAPITAL MARKET IN TERMS
OF EFFICIENCY
Tamara Backović Vulić1
Faculty of Economics, University of Montenegro
Abstract Capital market took the central role in the Economic Reform Agenda for
Montenegro. Mass voucher privatization (MVP) has been the initial promoter of capital
market development in Montenegro and it has had a substantial impact on the nature of the
transition process. Having in mind that Montenegro is a small and developing country, it is
no doubt that the establishment of the capital market institutions has been a foundation for
the capital market development. The main objective of this paper was to undertake an
econometric analysis of the stock exchange index MONEX20 time series aiming to
measure whether the Montenegrin capital market is efficient. Capital market efficiency was
tested by performing a stationarity test, Run test and autocorrelation function test. Final
result from all tests showed that the capital market in Montenegro is not an efficient one.
Investors can use technical analysis to predict future movement of prices and beat the
market.
KEYWORDS: CAPITAL MARKET; STOCK EXCHANGE
STATIONARITY; CAPITAL MARKET EFFICIENCY
INDEX;
RISK;
JEL Classification: C22, C52, G10
1. INTRODUCTION
An efficient market is a market where market prices fully reflect all of the relevant
information. The efficient-market hypothesis (EMH) is the method for evaluating the
movement of stock prices. According to the EMH, stocks are always traded at their fair
value on the stock market, making it impossible for investors to either purchase
undervalued stocks or sell stocks for inflated prices. Therefore, it should be impossible to
outperform the overall market through expert stock selection or market timing, and the
only way an investor can possibly obtain higher returns is by purchasing riskier
investments.
Business cycle theorists belive that business cycles can be predicted by using the multiple
regression model. Statistician Maurice Kendall tested the movement of stock prices and
prediction posibilities with a computer model in 1953. His conclusion was that the stock
prices are formed randomly. This ultimately led to the creation of the Random Walk
Hypothesis, and the closely related efficient-market hypothesis which states that random
price movements indicate a well-functioning or efficient market.2
The efficient-market hypothesis was developed by the American economist Eugene Fama
in 1965. The EMH involves three different forms of efficiency: the weak form, the semistrong form and the strong form. In the weak form of efficiency current prices are fully
defined by historical information. The semi-strong form goes a step further by
1
Address: Jovana Tomasevica 38 Podgorica, Montenegro
e-mail: [email protected]
2
Kendal, Maurice G., “The Analysis of Economic Time-Series-Part I: Prices”, 1953., Journal of the Royal Statistical Society, str. 11-34.
incorporating all historical and currently public information into the price. The strong form
includes historical and current public information as well as private information such as
insider information in the stock prices.3
Montenegro is a small developing country in Eastern Europe. Countries which belong to
this group usually have undeveloped financial institutions, undeveloped financial
instruments and an inefficient capital market due to nontransparent trading and high
transaction costs. Recently, the interest of investors for emerging capital markets has been
steadily rising. Therefore, an investigation of market efficiency for emerging markets in
this region was very popular in the last decade. Tabak and Cajueiro4 presented empirical
evidence of short and long-run predictability in stock returns for nine European transition
countries. They concluded that stock returns can be predicted in the long-run except for the
Ukrainian stock exchange, which converges towards efficiency. Random walk hypothesis
is proven for Bulgarian and Ukrainian stock exchanges. Jovic5 investigated the efficiency
of the capital market in Republika Srpska (a constituent of Bosnia and Herzegovina). His
conclusion was not unique, but according to sign tests and autocorrelation tests a weakform of efficiency was present. Ivanov, Lomev and Bogdanova6 investigated capital
market efficiency for seven East-European emerging economies: Bulgaria, Serbia, Croatia,
Ukraine, Russia, Turkey and Romania. For all of the analyzed capital markets there is a
clearly an indication for deviation from Random walk hypothesis and thus the studied
markets manifest inefficiency. Prorok and Radović7 tested the weak form of efficiency of
the capital market in Serbia. Results from their research show that the capital market in
Serbia is not efficient.
2. CAPITAL MARKET IN MONTENEGRO
Montenegro Stock Exchange was established in June 1993, based on the Law on Money
and Capital Market. In July 1995, Montenegro Stock Exchange harmonized its business
activities in compliance with the Law on stock exchange, stock exchange activities and
agents. Montenegro Stock Exchange obtained founding license from the Federal Ministry
of Finance, license for trading with short term securities from Yugoslav Central Bank and
license for trading with long term securities from the Federal Securities Commission.
Since September 2006 the Montenegro Stock Exchange has been an entirely privately
owned company due to the fact that the Government of Montenegro sold its 5% stake in
Montenegro Stock Exchange through an auction sale on the stock market. For this
package, the price was € 1,100.00 per share, or five times more than the nominal value,
representing a market capitalization of the Stock Exchange of € 1.4 million.
Even though the first stock exchange in Montenegro was founded in 1993, the first trade
with long term securities was realized only after the Parliament passed the Law on
Securities in 2002. The Law on Securities regulates the terms and conditions for issuance,
3 Fama, Eugene F., “Efficient Capital Markets: A Review of Theory and Empirical Work”, 1970., Journal of Finance Vol. 25, pp. 383417.
4 Tabak, Benjamin and Cajueiro, Daniel, “). Testing for predictability in equity returns for European transition markets”, 2006.,
Economic Systems Vol. 30, pp. 56-78.
5 Jović, Dragan, “Weak-form efficiency of the stock market”, 2010. Bankarstvo Vol.5-6, pp. 56-79.
6
Ivanov, Ivan, Lomev, Boyan and Bogdanova, Boryana, “Investigation of the market efficiency of emerging stock markets in the EastEuropean region”, 2012., International Journal of Applied Operational Research Vol. 2 (2), pp. 13-22
7
Prorok, Vesna and Radović, Dajana, “Weak-form hypothesis testing of the Serbian capital market efficiency”, 2014., Socioeconomica
Vol. 3 (5), pp. 51-64
public offering and trading of securities, the rights and obligations of participants in the
securities market, and the organization, scope and powers of the Securities Commission.
The New Montenegrin Stock Exchange (NEX Montenegro) Podgorica was founded in
September, 2001. In November 2001, it was given the authorization to do business by the
Montenegrin Securities Commission.
Until the end of 2010, Montenegro has had two stock exchanges: Montenegro Stock
Exchange and NEX Montenegro Stock Exchange. In January 2010, stockholders in NEX
Montenegro approved a merger with the Montenegro Stock Exchange. The merger
consolidated and simplified securities trading in Montenegro.
After the merger, NEX Montenegro was established with principal stock exchange indices
are MONEX20 and MONEXPIF. The starting value of MONEX20 index on January 1st
2011 was 14,522.53 stock market points, and the starting value of MONEXPIF index was
6,595.82 stock market points.
The Securities Commission is the market regulator in Montenegro. The SCM was founded
in 2000 and it took over the jurisdiction from the Yugoslav Federal Commission for
Securities and Financial Markets. The SCM has the authority to enact implementing
provisions to the Law on Securities, to approve and supervise public offers of securities, to
license and supervise securities markets participants, to authorize and regulate collective
investment schemes, to regulate the manner and scope of the trading in the securities
market and to regulate takeovers.
According to the Securities Law, trading of securities can be performed only at the official
stock exchanges; therefore no OTC market exists in Montenegro.
The bond market in Montenegro is limited to issuing T-bonds and T-bills by the Central
Bank of Montenegro, and municipal bonds by the different municipalities in Montenegro.
Because of these limitations, this aspect of the market is rather undeveloped. Hence, it can
be concluded that the capital market in Montenegro is actually the stock market.
3. THE METHODOLOGY
The procedure for testing weak form of efficiency assumes identification of a pattern for
short-term market returns movements by using historical data. Weak form of efficiency is
accomplished if the pattern of movements cannot be identified and it can be inferred that
the returns follow a random walk process. There are several techniques available for
determination of patterns in time series data. Three very popular tests of market efficiency
are applied in this paper – Augmented Dickey-Fuller (ADF) test, Run test and
Autocorrelation Function (ACF) test.
The Augmented Dickey–Fuller (ADF) test is the most popular stationary test. The ADF
test is used to test the unit root hypothesis. If a time series has a unit root then it is nonstationary and it follows random walk. The test is based on two possible equations:
Yt  Yt 1  u t
(1)
After subtraction of Yt-1 from the left and the right side of equation, the equation can be
written in the following form:
Yt  Yt 1  Yt 1  Yt 1  u t  Yt  (   1)Yt 1  u t  Yt  Yt 1  u t
(2)
The null hypothesis can be defined in two ways: H0: =0 or H0: =1. But the basic
assumption of ADF test is that the error term ut is a white noise. For hypothesis testing, tau
distribution is applied. The reason for using tau statistics instead of Student t statistics is
the fact that if the series is not stationary then the normal distribution cannot be applied.
Null hypothesis is rejected if the estimated value of tau statistics is smaller than critical
value. In this case, the analyzed series doesn’t have a unit root and is stationary. If the time
series is stationary, that means that it follows a predictable path. If the stationary time
series represents returns on the capital market, then this market is not efficient.
The Run test is a non-parameter test for checking if the Random walk hypothesis applies
for specific time series. This test assess whether a sequence of observations can be
accepted as a random sequence. If the test is applied on the time series which represents
stock returns, then the sequence can be defined as positive or negative. If the future
changes in stock prices are random, than the Null hypothesis of series random movements
cannot be rejected. In this case, normal distribution can be applied, with the expected value
and standard deviation defined bellow:
E ( R) 
N ( N  1)   3i 1 n i2
N
(3)
1
  3 [ 3 n 2  N ( N  1)]  2 N ( i31 n i3  N 3 )  2
 R   i 1 i 1 i

N 2 ( N  1)


(4)
Where ni represents the total number of positive and negative sequences. If the sample is
large, than normal distribution can be assumed. In this case the empirical value of normal
distribution for the Run test is:
Z
R  E ( R)
R
(5)
If the empirical absolute value of Z statistics is greater than the critical value, then the Null
hypothesis is rejected, the Random walk hypothesis does not apply and the capital market
is inefficient.
The Hurst exponent is a method for quantification of long-memory, which is based on
estimating a range of swings of the variable over time. Edwin Hurst was a hydraulic
engineer working on the Nile River in the 20th century. He wanted to test the hypothesis
that the different annual river flows were random. In order to prove this statement, he
developed a way of testing a series of numbers to determine whether or not they were
random. He was surprised when the test showed a negative answer.
The same test can be applied to any time series, including financial time series. According
to the original proposition, the Hurst exponent (H) can vary between 0 and 1. If the value
of the Hurst exponent is 0.5, then the time series follows a random walk. If the value of the
exponent is less than 0.5, the series becomes anti-persistent. It means that if the value of
the series in the previous period was high, it is likely to reduce in the future towards mean
value. If the Hurst exponent is greater than 0.5, then the time series does not follow a
random walk.
According to Peters8, one of the most popular methods for estimating the Hurst exponent is
the Range to standard deviation ratio. The first step in estimating the Hurst exponent is to
define a time series with M observations. Financial series tend to display non-stationarity.
Therefore, original financial time series must be reduced to returns series as follows:
X t  log(
Mt
)
M t 1
(6)
The reduced time series has to be divided into several sub-periods with equal number of
observations. For each sub-period we calculate a mean return (μa):
a 
1 n
 Xk
n k 1
(7)
Then the returns has to be trend-adjusted by subtracting the mean return form daily returns:
rt , a  X t , a   a
(8)
In the next step, cumulative trend adjusted return series for each sub-period is created:
t
c t , a   r( t , a ),i
(9)
i 1
Range of the cumulative trend adjusted return series of each sub-period is measured by
taking differences of maximum and minimum cumulative returns:
Rt ,a  max(c1, a , c 2, a ,..., ct ,a )  min(c1, a , c 2, a ,..., ct , a )
(10)
The standard deviation of each sub-period is:
S t ,a 
1 t
( X t ,a   a ) 2

t i 1
(11)
Rescaled range to standard deviation of each sub-period is calculated with the following
ratio:
8
Peters, Edgar E. “Chaos and order in the capital markets”, 1996. John Wiley & Sons, Inc. pp. 62-72
Rt , a
R
( ) t ,a 
S
S t ,a
(12)
Finally, the Hurst exponent can be obtained by solving the equation:
R
( ) t  C.n H
S
(13)
The Autocorrelation function is one of the stationarity tests. Autocorrelation function with
lag k is defined as follows:
k 
k
0
(14)
Where  k represents covariance of analyzed series and  0 its variance. If the
autocorrelation function is based on a data from sample, then sample covariance and
variance can be calculated using following estimates:

k 

0
 (Y
t
 Y )(Yt  k  Y )
n
 (Y

t
 Y )2
n
(15)
(16)
Where n represents sample size and Y sample expected value.
Autocorrelation function calculated from the sample is:

k

k  
0
(17)

Graphical representation of  k is called sample correlogram.
Non-randomness in data can be detected using an autocorrelation function and a partial
autocorrelation function.
If a time series represents returns on specific stock, then the autocorrelation function is
calculated by using the following formula:
nk
pk 
 ( Rt  R )( Rt k  R )
t 1
n
 ( Rt  R ) 2
(18)
t 1
Where k is the number of lags and Rt the stock return rate defined as:
 P 
Rt  ln t   100    u
 Pt 1 
(19)
Two most important tests which use the autocorrelation function are the standard error test
and the Box-Pierce Q test. The first one calculates the autocorrelation function for every
lag in the sample and identifies which one is statistically significant. On the other hand,
Box-Pierce statistics calculates the autocorrelation function for all the series values up to
lag k.
The value of standard error is calculated as follows:
k 1
1  2 t2
t 1
(20)
N
Where N represents a number of observations and  k is the autocorrelation function for lag
k. If the autocorrelation function value is statistically significant, then the null hypothesis
can be rejected and the conclusion is that the autocorrelation at given lag exists. If an
analyzed time series is a return on a specific stock, this means that this series is not
stationary and that the market is efficient.
The Box-Pierce Q statistics estimate is:
Rt2
t 1 N  t
k
N ( N  2) 
(21)
The calculated value of Q-statistics is compared to the critical value of χ2 distribution.
Usually, small values of the autocorrelation function lead to small values of Q-statistics. In
this case, the null hypothesis of no autocorrelation cannot be rejected and the time series is
stationary. If the time series represents stock return then the market is inefficient.
4. EMPIRICAL RESULTS
The research in this paper is based on the stock market index MONEX20, obtained from
the Montenegro stock exchange. It is daily data (5-day weeks) and the sample is defined
for the period from January 5th 2004 until September 1st 2014. The sample consists of
2781 observations. The time series analyzed in this paper represents the return on stock
market index MONEX20, which is calculated using the following formula:
RTMONEX 20t  ln(
MONEX 20 t
)  100
MONEX 20 t 1
Where RTMONEX20 represents the return on stock market index MONEX20
(22)
4.1 Unit root stationarity test
The first step in providing an appropriate unit root test is estimating the AR(1) model for
return on stock market index MONEX20:
RTMONEX 20 t  RTMONEX 20 t 1  u t
(23)
If the serial correlation and heteroscedasticity in errors are present, Phillips-Perron test is
more suitable, but if the model has no autocorrelation error problem and heteroscedasticity,
then the Augmented Dickey-Fuller test can be applied. The estimated AR(1) model was
free from residual autocorrelation, but heteroscedasticity was detected. Therefore, the
Phillips-Perron test will be implemented.
Table 1. Phillips-Perron unit root test for series RTMONEX20
Null Hypothesis: RTMONEX20 has a unit root
Exogenous: None
Bandwidth: 20 (Newey-West automatic) using Bartlett kernel
Phillips-Perron test statistic
Test critical values:
1% level
5% level
10% level
Adj. t-Stat
Prob.*
-45.21587
-2.565794
-1.940938
-1.616623
0.0001
*MacKinnon (1996) one-sided p-values.
Residual variance (no correction)
HAC corrected variance (Bartlett kernel)
0.000262
0.000393
Phillips-Perron Test Equation
Dependent Variable: D(RTMONEX20)
Method: Least Squares
Sample (adjusted): 1/05/2004 9/01/2014
Included observations: 2781 after adjustments
Variable
Coefficient
Std. Error
t-Statistic
Prob.
RTMONEX20(-1)
-0.787994
0.018535
-42.51394
0.0000
R-squared
0.393997 Mean dependent var
1.74E-07
Adjusted R-squared
0.393997 S.D. dependent var
0.020807
S.E. of regression
0.016198 Akaike info criterion
-5.407546
Sum squared resid
0.729368 Schwarz criterion
-5.405414
Log likelihood
7520.193 Hannan-Quinn criter.
-5.406776
Durbin-Watson stat
2.000628
Source: Author’s processing in the Eviews 7 statistical software
The absolute value of the Phillips-Perron statistics is much higher than the critical values
of test statistics at 1%, 5% and 10% significance level. Hence, we reject the Null
hypothesis. Time series RTMONEX20 is stationary and it does not have a unit rot.
Accordingly we reject the hypothesis of weak form efficiency for the capital market in
Montenegro.
4.2 The Run test
In order to test whether the previous results about the Montenegrin capital market
efficiency are correct, a nonparametric Run test will be implemented. Null hypothesis
defined by Run test suggests that Random walk theory is applicable for analyzed time
series.
Table 2. Run test applied to return on index MONEX20Error! Not a valid link. Source:
Author’s processing
Run test applied separately for every single year of the analyzed period did not clear up
whether capital market in Montenegro is efficient or not. According to the results, the
capital market of Montenegro is weak-form efficient in 7 out of the 11 analyzed years. The
capital market of Montenegro is efficient in the first two and the last five years of analysis.
In the next step, Run test was provided for the whole period from 2004 to 2014. The final
conclusion of this test is that the Random walk of return on stock market index MONEX20
is not recognized. Overall, capital market of Montenegro in this period is not efficient. The
good side of this test is the fact that in the last five years the capital market of Montenegro
is showing signs of efficiency.
4.3 The Hurst exponent
The Hurst coefficient was calculated based on the subsamples of stock market index return
RTMONEX20. A RTMONEX20 time series was divided into 6 series with following
length: 100, 500, 1000, 1500, 2000 and 2500.
The mean (m) for a partial time series was calculated and used for creating a meanadjusted time series, MONEX20t-m. After calculating the cumulative derivate series Zt,
the next step was computing the range of Zt and standard deviation of mean-adjusted time
series, MONEX20t-m. The results are given in the following table:
Table 3. Calculation of Hurst coefficient elements
n
100
500
1000
1500
2000
2500
m
0.002312
0.004285
0.003376
0.001763
0.0011
0.000807
Rn
0.266986
0.688874
1.059308
2.67179
2.807956
3.012126
Sn
log(Rn/Sn)
log(n)
0.018039 1.170268
2
0.01898
1.559848
2.69897
0.018253 1.763677
3
0.020674 2.111384 3.176091
0.018608 2.178683
3.30103
0.017293 2.240999
3.39794
Source: Author’s processing
The value of the Hurst coefficient is the slope value in regression where log(Rn/Sn)
represents the dependent variable and the log(n) is the independent variable. According to
the results given in Table 3, the Hurst coefficient value for the Montenegrin capital market
is 0.79. The probability of positive return values being followed by positive values and
negative return values being followed by negative values is 79%. That means that the
return on stock market index MONEX20 does not follow random walk and that the capital
market of Montenegro is persistent.
4.4 The Autocorrelation function
The autocorrelation function (ACF) test is examined to identify the degree of
autocorrelation in a time series. It measures the correlation between the current and lagged
observations of the time series of stock returns.
If a time series has unit root then the autocorrelation function slowly decreases starting
from the value of one, and the partial correlation function has only the first value which
differs from zero. If one time series has two unit roots, ACF acts the same way as for the
one unit root series, but the PACF has only the first two non-zero values.
Table 4. ACF and PACF values for time series return on index MONEX20
t
1
2
3
4
5
6
7
8
9
10
11
12
13
AC
0.210
0.044
0.009
0.068
0.086
0.034
0.021
0.052
0.088
0.056
0.022
0.045
0.020
PAC
0.210
-0.000
-0.000
0.069
0.060
0.001
0.012
0.044
0.063
0.018
0.003
0.036
-0.010
t
14
15
16
17
18
19
20
21
22
23
24
25
26
AC
0.067
0.061
0.059
0.008
-0.013
0.027
0.051
0.032
0.010
0.030
0.043
0.025
-0.005
PAC
0.052
0.032
0.033
-0.023
-0.026
0.021
0.029
0.003
-0.002
0.021
0.015
-0.002
-0.017
t
27
28
29
30
31
32
33
34
35
36
37
38
39
AC
0.007
0.025
-0.004
0.011
0.034
0.024
0.054
0.029
0.027
0.014
-0.016
0.012
0.060
PAC
0.009
0.008
-0.028
0.008
0.029
0.003
0.044
0.008
0.010
-0.004
-0.030
0.015
0.049
t
40
41
42
43
44
45
46
47
48
49
50
51
52
AC
0.038
0.024
0.008
0.000
0.028
0.037
-0.033
-0.015
0.012
0.005
-0.017
-0.022
-0.035
PAC
0.004
0.012
-0.004
-0.016
0.017
0.021
-0.051
-0.013
0.004
-0.013
-0.023
-0.012
-0.031
Source: Author’s processing
The number of lags was defined by the criterion that t is equal to T , where T is the total
number of observations in time series RTMONEX20. According to the Null hypothesis an
analyzed time series is not stationary, meaning that the AC and PAC values are equal to
zero. To determine whether the autocorrelation coefficient is different from zero, the value
of the autocorrelation coefficient at each lag will be compared with a band at 95%
confidence interval: ±1.96·1/ T . If the value of the autocorrelation coefficient at a given
lag falls outside this band, then it is significant which implies rejecting the null hypothesis
that the value of the coefficient is zero. In this paper, the number of observations is
T=2783. Therefore, the lower band of confidence interval is: -1.96·1/ 2783 = -0.037 and
the upper band has a value of 0.037=1.96·1/ 2783 . Almost half of the AC and PAC
coefficients are not statistically significant. In order to test the joint hypothesis that all
autocorrelation coefficients are simultaneously equal to zero, the next step will be
calculating the Ljung-Box Q-statistics.
The value of Q-statistics is:
t
Qˆ  T    k2  2783  0.070847  197.1672
k 1
The critical value of chi-square statistics with 1% significance level is:
ˆ 52;0.01  78.616
Ljung-Box Q statistics indicate evidence of dependence in the first and higher moments of
the return distributions. The Ljung-Box Q statistics for the first 52 lags rejected the null
hypothesis at 1% significant level for the entire sample series. To sum up, ACFs show
strong evidence of serial correlation and it is also supported with Ljung-Box Q statistical
findings. Therefore, the null hypothesis of no serial correlation for the return on stock
market index MONEX20 is rejected.
5. CONCLUSION
The main task of this paper was to investigate the presence of the weak-form of efficiency
on the capital market in Montenegro. In order to do so, basic parametric and nonparametric tests were obtained. According to the Unit root test, the capital market of
Montenegro does not have the characteristics of randomness for the return time series,
which means that participants can beat the market and gain an abnormal profit. The Run
test also showed that the capital market is inefficient. The optimistic side of the Run test is
the fact that the random walk hypothesis was accepted for the last five years of analysis. It
means that the capital market in Montenegro is slowly developing, growing and achieving
the transparency needed to become efficient. The Hurst exponent value did not corroborate
this finding that the Montenegrin capital market has developing lately. The conclusion of
this test was that the capital market in Montenegro is persistent. The last test was
investigating the autocorrelation for the return of the stock market index MONEX20.
According to the results of AC and PAC values and Ljung-Box Q statistics, the capital
market in Montenegro is inefficient.
Even though all tests that were obtained in this paper showed that weak-form of efficiency
is not present, some of the results indicate a positive trend for the capital market in
Montenegro i.e. that it is becoming more efficient. The suggestion for the policy makers
and all the relevant institutions would be to enforce a strict implementation of the laws and
bylaws, as well as to decrease transaction costs. This would ensure that a participant has
much more to lose by trying to beat the market than by playing a “fair game”.
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Online ISSN: 2303-6176
Print ISSN: 2303-6044
Vol. 1(2) / pp.108-126
Characteristics of the Montenegro's Capital Market in Terms of Efficiency
University of Montenegro
Montenegro
[email protected]
Abstract
Capital market took the central role in the Economic Reform Agenda for Montenegro.
Mass voucher privatization (MVP) has been the initial promoter of capital market
development in Montenegro and it has had a substantial impact on the nature of the
transition process. Having in mind that Montenegro is a small and developing country, it
is no doubt that the establishment of the capital market institutions has been a foundation
for the capital market development. The main objective of this paper was to undertake an
econometric analysis of the stock exchange index MONEX20 time series aiming to
measure whether the Montenegrin capital market is efficient. Capital market efficiency
was tested by performing a stationarity test, Run test and autocorrelation function test.
Final result from all tests showed that the capital market in Montenegro is not an efficient
one. Investors can use technical analysis to predict future movement of prices and beat
the market.
Keywords: Capital Market; Stock Exchange Index; Risk; Stationarity; Capital Market Efficiency
JEL Classification: C22, C52, G10
Citation:
. B. (2014). Characteristics of the Montenegro's Capital Market in Terms of Efficiency.
Journal of Social and Business Studies, 1(2), 108-126.
Social and Business Development Center
www.sbdcenter.com
1 Introduction
An efficient market is a market where market prices fully reflect all of the relevant
information. The efficient-market hypothesis (EMH) is the method for evaluating the
movement of stock prices. According to the EMH, stocks are always traded at their fair
value on the stock market, making it impossible for investors to either purchase
undervalued stocks or sell stocks for inflated prices. Therefore, it should be impossible to
outperform the overall market through expert stock selection or market timing, and the
only way an investor can possibly obtain higher returns is by purchasing riskier
investments.
Business cycle theorists belive that business cycles can be predicted by using the multiple
regression model. Statistician Maurice Kendall tested the movement of stock prices and
prediction posibilities with a computer model in 1953. His conclusion was that the stock
prices are formed randomly. This ultimately led to the creation of the Random Walk
Hypothesis, and the closely related efficient-market hypothesis which states that random
price movements indicate a well-functioning or efficient market.1
The efficient-market hypothesis was developed by the American economist Eugene Fama
in 1965. The EMH involves three different forms of efficiency: the weak form, the semistrong form and the strong form. In the weak form of efficiency current prices are fully
defined by historical information. The semi-strong form goes a step further by
incorporating all historical and currently public information into the price. The strong form
includes historical and current public information as well as private information such as
insider information in the stock prices.2
Montenegro is a small developing country in Eastern Europe. Countries which belong to
this group usually have undeveloped financial institutions, undeveloped financial
instruments and an inefficient capital market due to nontransparent trading and high
transaction costs. Recently, the interest of investors for emerging capital markets has been
1
-Series-
2
Journal of the Royal Statistical Society, str. 11-34.
pp. 383-
417.
c Social and Business Development Center
www.sbdcenter.com
steadily rising. Therefore, an investigation of market efficiency for emerging markets in
this region was very popular in the last decade. Tabak and Cajueiro3 presented empirical
evidence of short and long-run predictability in stock returns for nine European transition
countries. They concluded that stock returns can be predicted in the long-run except for the
Ukrainian stock exchange, which converges towards efficiency. Random walk hypothesis
is proven for Bulgarian and Ukrainian stock exchanges. Jovic4 investigated the efficiency
of the capital market in Republika Srpska (a constituent of Bosnia and Herzegovina). His
conclusion was not unique, but according to sign tests and autocorrelation tests a weakform of efficiency was present. Ivanov, Lomev and Bogdanova5 investigated capital
market efficiency for seven East-European emerging economies: Bulgaria, Serbia, Croatia,
Ukraine, Russia, Turkey and Romania. For all of the analyzed capital markets there is a
clearly an indication for deviation from Random walk hypothesis and thus the studied
markets manifest inefficiency. Prorok and Radovi
6
tested the weak form of efficiency of
the capital market in Serbia. Results from their research show that the capital market in
Serbia is not efficient.
2 Capital Market in Montenegro
Montenegro Stock Exchange was established in June 1993, based on the Law on Money
and Capital Market. In July 1995, Montenegro Stock Exchange harmonized its business
activities in compliance with the Law on stock exchange, stock exchange activities and
agents. Montenegro Stock Exchange obtained founding license from the Federal Ministry
of Finance, license for trading with short term securities from Yugoslav Central Bank and
license for trading with long term securities from the Federal Securities Commission.
Since September 2006 the Montenegro Stock Exchange has been an entirely privately
owned company due to the fact that the Government of Montenegro sold its 5% stake in
Montenegro Stock Exchange through an auction sale on the stock market. For this
3
). Testing for predictability in equity returns for European transition markets
Economic Systems Vol. 30, pp. 56-78.
4
Jovi
-
-6, pp. 56-79.
5
6
Easttional Journal of Applied Operational Research Vol. 2 (2), pp. 13-22
-
Vol. 3 (5), pp. 51-64
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package, th
Even though the first stock exchange in Montenegro was founded in 1993, the first trade
with long term securities was realized only after the Parliament passed the Law on
Securities in 2002. The Law on Securities regulates the terms and conditions for issuance,
public offering and trading of securities, the rights and obligations of participants in the
securities market, and the organization, scope and powers of the Securities Commission.
The New Montenegrin Stock Exchange (NEX Montenegro) Podgorica was founded in
September, 2001. In November 2001, it was given the authorization to do business by the
Montenegrin Securities Commission.
Until the end of 2010, Montenegro has had two stock exchanges: Montenegro Stock
Exchange and NEX Montenegro Stock Exchange. In January 2010, stockholders in NEX
Montenegro approved a merger with the Montenegro Stock Exchange. The merger
After the merger, NEX Montenegro was established with principal stock exchange indices
are MONEX20 and MONEXPIF. The starting value of MONEX20 index on January 1st
2011 was 14,522.53 stock market points, and the starting value of MONEXPIF index was
6,595.82 stock market points.
The Securities Commission is the market regulator in Montenegro. The SCM was founded
in 2000 and it took over the jurisdiction from the Yugoslav Federal Commission for
Securities and Financial Markets. The SCM has the authority to enact implementing
provisions to the Law on Securities, to approve and supervise public offers of securities, to
license and supervise securities markets participants, to authorize and regulate collective
investment schemes, to regulate the manner and scope of the trading in the securities
market and to regulate takeovers.
According to the Securities Law, trading of securities can be performed only at the official
stock exchanges; therefore no OTC market exists in Montenegro.
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The bond market in Montenegro is limited to issuing T-bonds and T-bills by the Central
Bank of Montenegro, and municipal bonds by the different municipalities in Montenegro.
Because of these limitations, this aspect of the market is rather undeveloped. Hence, it can
be concluded that the capital market in Montenegro is actually the stock market.
3 The Methodology
The procedure for testing weak form of efficiency assumes identification of a pattern for
short-term market returns movements by using historical data. Weak form of efficiency is
accomplished if the pattern of movements cannot be identified and it can be inferred that
the returns follow a random walk process. There are several techniques available for
determination of patterns in time series data. Three very popular tests of market efficiency
are applied in this paper
Augmented Dickey-Fuller (ADF) test, Run test and
Autocorrelation Function (ACF) test.
The Augmented Dickey Fuller (ADF) test is the most popular stationary test. The ADF
test is used to test the unit root hypothesis. If a time series has a unit root then it is nonstationary and it follows random walk. The test is based on two possible equations:
Yt
Yt
1
ut
(1)
After subtraction of Yt-1 from the left and the right side of equation, the equation can be
written in the following form:
Yt
Yt
1
Yt
1
Yt
1
ut
Yt
(
1)Yt
1
ut
Yt
Yt
1
ut
The null hypothesis can be defined in two ways: H0: =0 or H0:
(2)
=1. But the basic
assumption of ADF test is that the error term ut is a white noise. For hypothesis testing, tau
distribution is applied. The reason for using tau statistics instead of Student t statistics is
the fact that if the series is not stationary then the normal distribution cannot be applied.
Null hypothesis is rejected if the estimated value of tau statistics is smaller than critical
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value. In this case, the analyzed seri
series is stationary, that means that it follows a predictable path. If the stationary time
series represents returns on the capital market, then this market is not efficient.
The Run test is a non-parameter test for checking if the Random walk hypothesis applies
for specific time series. This test assess whether a sequence of observations can be
accepted as a random sequence. If the test is applied on the time series which represents
stock returns, then the sequence can be defined as positive or negative. If the future
changes in stock prices are random, than the Null hypothesis of series random movements
cannot be rejected. In this case, normal distribution can be applied, with the expected value
and standard deviation defined bellow:
E ( R)
N ( N 1)
N
3
i 1
[
R
3
i 1
ni2
3
i 1
ni2
N ( N 1)] 2 N (
(3)
3
i 1
ni3
N3)
1
2
N 2 ( N 1)
(4)
Where ni represents the total number of positive and negative sequences. If the sample is
large, than normal distribution can be assumed. In this case the empirical value of normal
distribution for the Run test is:
Z
R E ( R)
(5)
R
If the empirical absolute value of Z statistics is greater than the critical value, then the Null
hypothesis is rejected, the Random walk hypothesis does not apply and the capital market
is inefficient.
The Hurst exponent is a method for quantification of long-memory, which is based on
estimating a range of swings of the variable over time. Edwin Hurst was a hydraulic
engineer working on the Nile River in the 20th century. He wanted to test the hypothesis
that the different annual river flows were random. In order to prove this statement, he
developed a way of testing a series of numbers to determine whether or not they were
random. He was surprised when the test showed a negative answer.
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The same test can be applied to any time series, including financial time series. According
to the original proposition, the Hurst exponent (H) can vary between 0 and 1. If the value
of the Hurst exponent is 0.5, then the time series follows a random walk. If the value of the
exponent is less than 0.5, the series becomes anti-persistent. It means that if the value of
the series in the previous period was high, it is likely to reduce in the future towards mean
value. If the Hurst exponent is greater than 0.5, then the time series does not follow a
random walk.
According to Peters7, one of the most popular methods for estimating the Hurst exponent is
the Range to standard deviation ratio. The first step in estimating the Hurst exponent is to
define a time series with M observations. Financial series tend to display non-stationarity.
Therefore, original financial time series must be reduced to returns series as follows:
Xt
log(
Mt
)
Mt 1
(6)
The reduced time series has to be divided into several sub-periods with equal number of
observations. For each sub-period we calculate a mean return (µa):
a
n
1
n
Xk
(7)
k 1
Then the returns has to be trend-adjusted by subtracting the mean return form daily returns:
rt ,a
X t ,a
(8)
a
In the next step, cumulative trend adjusted return series for each sub-period is created:
t
ct , a
(9)
r( t ,a ), i
i 1
Range of the cumulative trend adjusted return series of each sub-period is measured by
taking differences of maximum and minimum cumulative returns:
Rt , a
(10)
max( c1,a , c 2,a ,..., ct , a ) min( c1, a , c2,a ,..., ct ,a )
The standard deviation of each sub-period is:
S t ,a
1 t
( X t ,a
t i1
a
)2
(11)
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-72
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Rescaled range to standard deviation of each sub-period is calculated with the following
ratio:
Rt ,a
R
( ) t ,a
S
(12)
S t ,a
Finally, the Hurst exponent can be obtained by solving the equation:
R
( )t
S
C.n H
(13)
The Autocorrelation function is one of the stationarity tests. Autocorrelation function with
lag k is defined as follows:
k
(14)
k
0
Where
represents covariance of analyzed series and
k
0
its variance. If the
autocorrelation function is based on a data from sample, then sample covariance and
variance can be calculated using following estimates:
(Yt Y )(Yt
k
k
Y)
(15)
n
Y )2
(Yt
0
(16)
n
Where n represents sample size and Y sample expected value.
Autocorrelation function calculated from the sample is:
k
(17)
k
0
Graphical representation of
k
is called sample correlogram.
Non-randomness in data can be detected using an autocorrelation function and a partial
autocorrelation function.
If a time series represents returns on specific stock, then the autocorrelation function is
calculated by using the following formula:
n k
( Rt
pk
R )( Rt
k
R)
t 1
(18)
n
( Rt
R)2
t 1
Where k is the number of lags and Rt the stock return rate defined as:
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Rt
Pt
Pt 1
ln
100
(19)
u
Two most important tests which use the autocorrelation function are the standard error test
and the Box-Pierce Q test. The first one calculates the autocorrelation function for every
lag in the sample and identifies which one is statistically significant. On the other hand,
Box-Pierce statistics calculates the autocorrelation function for all the series values up to
lag k.
The value of standard error is calculated as follows:
k 1
2
t
1 2
t 1
(20)
N
Where N represents a number of observations and
k
is the autocorrelation function for lag
k. If the autocorrelation function value is statistically significant, then the null hypothesis
can be rejected and the conclusion is that the autocorrelation at given lag exists. If an
analyzed time series is a return on a specific stock, this means that this series is not
stationary and that the market is efficient.
The Box-Pierce Q statistics estimate is:
Rt2
1 N t
k
N (N
2)
t
(21)
The calculated value of Q-statistics is compared to the critical value of
2
distribution.
Usually, small values of the autocorrelation function lead to small values of Q-statistics. In
this case, the null hypothesis of no autocorrelation cannot be rejected and the time series is
stationary. If the time series represents stock return then the market is inefficient.
4 Empirical Results
The research in this paper is based on the stock market index MONEX20, obtained from
the Montenegro stock exchange. It is daily data (5-day weeks) and the sample is defined
for the period from January 5th 2004 until September 1st 2014. The sample consists of
2781 observations. The time series analyzed in this paper represents the return on stock
market index MONEX20, which is calculated using the following formula:
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RTMONEX 20t
ln(
MONEX 20 t
) 100
MONEX 20 t 1
(22)
Where RTMONEX20 represents the return on stock market index MONEX20
4.1 Unit root stationarity test
The first step in providing an appropriate unit root test is estimating the AR(1) model for
return on stock market index MONEX20:
RTMONEX 20 t
RTMONEX 20t
1
ut
(23)
If the serial correlation and heteroscedasticity in errors are present, Phillips-Perron test is
more suitable, but if the model has no autocorrelation error problem and heteroscedasticity,
then the Augmented Dickey-Fuller test can be applied. The estimated AR(1) model was
free from residual autocorrelation, but heteroscedasticity was detected. Therefore, the
Phillips-Perron test will be implemented.
Table 1. Phillips-Perron unit root test for series RTMONEX20
Exogenous: None
Bandwidth: 20 (Newey-West automatic) using Bartlett kernel
Phillips-Perron test statistic
Adj. t-Stat
Prob.*
-45.21587
0.0001
1% level
-2.565794
5% level
-1.940938
10% level
-1.616623
Residual variance (no correction)
0.000262
HAC corrected variance (Bartlett kernel)
0.000393
Phillips-Perron Test Equation
Dependent Variable: D(RTMONEX20)
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Sample (adjusted): 1/05/2004 9/01/2014
Variable
Coefficient
Std. Error
t-Statistic
Prob.
RTMONEX20(-1)
-0.787994
0.018535
-42.51394
0.0000
R-squared
0.393997
Mean dependent var
1.74E-07
Adjusted R-squared
0.393997
S.D. dependent var
0.020807
S.E. of regression
0.016198
Akaike info criterion
-5.407546
Sum squared resid
0.729368
Schwarz criterion
-5.405414
Log likelihood
7520.193
Hannan-Quinn criter.
-5.406776
Durbin-Watson stat
2.000628
Source: Author’ s processing in the Eviews 7 statistical software
The absolute value of the Phillips-Perron statistics is much higher than the critical values
of test statistics at 1%, 5% and 10% significance level. Hence, we reject the Null
hypothesis. Time series RTMONEX20 is stationary and it does not have a unit rot.
Accordingly we reject the hypothesis of weak form efficiency for the capital market in
Montenegro.
4.2 The Run test
In order to test whether the previous results about the Montenegrin capital market
efficiency are correct, a nonparametric Run test will be implemented. Null hypothesis
defined by Run test suggests that Random walk theory is applicable for analyzed time
series.
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Table 2. Run test applied to return on index MONEX20
Year
n1
n2
N
R
E(R)
2004
102
157
259
126
124.66
7.67
0.17
H0
2005
112
148
260
129
128.51
7.89
0.06
H0
2006
119
141
260
104
130.07
7.99
-3.26
reject H0
2007
107
148
255
73
125.20
7.76
-6.73
reject H0
2008
130
133
263
102
132.48
8.09
-3.77
reject H0
2009
105
156
261
103
126.52
7.75
-3.03
reject H0
2010
138
141
279
139
140.48
8.34
-0.18
H0
2011
125
135
260
123
130.81
8.03
-0.97
H0
2012
124
129
253
131
127.45
7.93
0.45
H0
2013
104
122
226
129
113.28
7.45
2.11
H0
2014
85
100
185
84
92.89
6.74
-1.32
H0
1225
1557
2782
1200
1372.19
25.99
-6.62
reject H0
20042014
Z
R
Z*(0.01)
Hypothesis
Source: Author’ s processing
Run test applied separately for every single year of the analyzed period did not clear up
whether capital market in Montenegro is efficient or not. According to the results, the
capital market of Montenegro is weak-form efficient in 7 out of the 11 analyzed years. The
capital market of Montenegro is efficient in the first two and the last five years of analysis.
In the next step, Run test was provided for the whole period from 2004 to 2014. The final
conclusion of this test is that the Random walk of return on stock market index MONEX20
is not recognized. Overall, capital market of Montenegro in this period is not efficient. The
good side of this test is the fact that in the last five years the capital market of Montenegro
is showing signs of efficiency.
4.3 The Hurst exponent
The Hurst coefficient was calculated based on the subsamples of stock market index return
RTMONEX20. A RTMONEX20 time series was divided into 6 series with following
length: 100, 500, 1000, 1500, 2000 and 2500.
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The mean (m) for a partial time series was calculated and used for creating a meanadjusted time series, MONEX20t-m. After calculating the cumulative derivate series Zt,
the next step was computing the range of Zt and standard deviation of mean-adjusted time
series, MONEX20t-m. The results are given in the following table:
Table 3. Calculation of Hurst coefficient elements
n
M
Rn
Sn
log(Rn/Sn)
log(n)
100
0.002312 0.266986 0.018039
1.170268
2
500
0.004285 0.688874
0.01898
1.559848
2.69897
1000
0.003376 1.059308 0.018253
1.763677
3
1500
0.001763
0.020674
2.111384
3.176091
2000
0.0011
2.807956 0.018608
2.178683
3.30103
0.000807 3.012126 0.017293
2.240999
3.39794
2500
2.67179
Source: Author’ s processing
The value of the Hurst coefficient is the slope value in regression where log(Rn/Sn)
represents the dependent variable and the log(n) is the independent variable. According to
the results given in Table 3, the Hurst coefficient value for the Montenegrin capital market
is 0.79. The probability of positive return values being followed by positive values and
negative return values being followed by negative values is 79%. That means that the
return on stock market index MONEX20 does not follow random walk and that the capital
market of Montenegro is persistent.
4.4 The Autocorrelation function
autocorrelation in a time series. It measures the correlation between the current and lagged
observations of the time series of stock returns.
If a time series has unit root then the autocorrelation function slowly decreases starting
from the value of one, and the partial correlation function has only the first value which
differs from zero. If one time series has two unit roots, ACF acts the same way as for the
one unit root series, but the PACF has only the first two non-zero values.
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Table 4. ACF and PACF values for time series return on index MONEX20
t
1
2
3
4
5
6
7
8
9
10
11
12
13
AC
0,21
0,044
0,009
0,068
0,086
0,034
0,021
0,052
0,088
0,056
0,022
0,045
0,02
PAC
0,21
0
0
0,069
0,06
0,001
0,012
0,044
0,063
0,018
0,003
0,036
-0,01
t
14
15
16
17
18
19
20
21
22
23
24
25
26
AC
0,067
0,061
0,059
0,008
-0,013
0,027
0,051
0,032
0,01
0,03
0,043
0,025
-0,005
PAC
0,052
0,032
0,033
-0,023
-0,026
0,021
0,029
0,003
-0,002
0,021
0,015
-0,002
-0,017
40
41
42
43
44
45
46
47
48
49
50
51
52
AC
0,038
0,024
0,008
0
0,028
0,037
-0,033
-0,015
0,012
0,005
-0,017
-0,022
-0,035
PAC
0,004
0,012
-0,004
-0,016
0,017
0,021
-0,051
-0,013
0,004
-0,013
-0,023
-0,012
-0,031
t
Source: Author’ s processings
t
27
28
29
30
31
32
33
34
35
36
37
38
39
AC
0,007
0,025
-0,004
0,011
0,034
0,024
0,054
0,029
0,027
0,014
-0,016
0,012
0,06
PAC
0,009
0,008
-0,028
0,008
0,029
0,003
0,044
0,008
0,01
-0,004
-0,03
0,015
0,049
The number of lags was defined by the criterion that t is equal to T , where T is the total number of
observations in time series RTMONEX20. According to the Null hypothesis an analyzed time series is
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not stationary, meaning that the AC and PAC values are equal to zero. To determine whether the
autocorrelation coefficient is different from zero, the value of the autocorrelation coefficient at each lag
T . If the value of the
autocorrelation coefficient at a given lag falls outside this band, then it is significant which implies
rejecting the null hypothesis that the value of the coefficient is zero. In this paper, the number of
observations is T=2783. Therefore, the lower band of confidence interval is: 2783 = -0.037
and the upper band has a
2783 . Almost half of the AC and PAC coefficients
are not statistically significant. In order to test the joint hypothesis that all autocorrelation coefficients
are simultaneously equal to zero, the next step will be calculating the Ljung-Box Q-statistics.
The value of Q-statistics is:
Qˆ T
t
2
k
2783 0.070847 197.1672
k 1
The critical value of chi-square statistics with 1% significance level is:
ˆ 52;0.01
78.616
Ljung-Box Q statistics indicate evidence of dependence in the first and higher moments of the return
distributions. The Ljung-Box Q statistics for the first 52 lags rejected the null hypothesis at 1%
significant level for the entire sample series. To sum up, ACFs show strong evidence of serial
correlation and it is also supported with Ljung-Box Q statistical findings. Therefore, the null hypothesis
of no serial correlation for the return on stock market index MONEX20 is rejected.
5 Conclusion
The main task of this paper was to investigate the presence of the weak-form of efficiency on the
capital market in Montenegro. In order to do so, basic parametric and non-parametric tests were
obtained. According to the Unit root test, the capital market of Montenegro does not have the
characteristics of randomness for the return time series, which means that participants can beat the
market and gain an abnormal profit. The Run test also showed that the capital market is inefficient. The
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optimistic side of the Run test is the fact that the random walk hypothesis was accepted for the last five
years of analysis. It means that the capital market in Montenegro is slowly developing, growing and
achieving the transparency needed to become efficient. The Hurst exponent value did not corroborate
this finding that the Montenegrin capital market has developing lately. The conclusion of this test was
that the capital market in Montenegro is persistent. The last test was investigating the autocorrelation
for the return of the stock market index MONEX20. According to the results of AC and PAC values
and Ljung-Box Q statistics, the capital market in Montenegro is inefficient.
Even though all tests that were obtained in this paper showed that weak-form of efficiency is not
present, some of the results indicate a positive trend for the capital market in Montenegro i.e. that it is
becoming more efficient. The suggestion for the policy makers and all the relevant institutions would
be to enforce a strict implementation of the laws and bylaws, as well as to decrease transaction costs.
This would ensure that a participant has much more to lose by trying to beat the market than by playing
fair game .
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Economics & Economy, Vol. 1, No. 3 (June, 2014), 33-45
MONTENEGRIN CAPITAL MARKET CHARACTERISTICS BASED ON
FINANCIAL TIME SERIES ANALYSIS
Tamara Backović Vulić1
Vesna Karadžić2
JEL Classification G11, G12:
Original Scientific Papaers
Primljeno / Received: March 07, 2014
Prihvaćeno / Accepted: May 21, 2014
Abstract
Capital market took the central role in the Economic Reform Agenda for Montenegro. Mass voucher
privatization (MVP) has been the initial promoter of the capital market development in Montenegro
and it has had a basic impact on the nature of the transition process. Having in mind that Montenegro
is a small and developing country, it is no doubt that the establishment of the capital market institutions has been a pillar for the capital market development. The number of transactions on the Montenegrin capital market has been growing rapidly since the period of stock exchange foundation. This
phenomenon has had a considerable impact on the transition of Montenegrin citizens’ mental blueprint.
Montenegro stock exchange is an important capital market agent. Therefore, data series of its index
MONEX20 provide valuable research reference. The main objective of this paper is to undertake econometric analysis of the MONEX20 time series aiming to derive the main characteristics of the Montenegrin capital market. Providing an appropriate Unit root test it will be tried in this paper to find out
whether the capital market in Montenegro is an efficient one. It will be tested whether share prices
follow a random walk in which case they are nonstationary and hence unpredictable. It is the case when
a capital market is indicated as an efficient one. Volatility is another very important characteristic of a
capital market. High volatility is a sign of market instability. Participants on capital market are trying
to reduce the risk of their investments. Therefore, they try to avoid volatile markets. In order to anticipate a value of volatility of Montenegrin capital market, concept of historical volatility was presented
and used to forecast volatility.
The paper is divided in four segments. In the introduction some basic information regarding the
analyzed time series are presented. The second part of the paper is dedicated to the methodology of time
series analysis. The third part contains the results of the empirical analysis of time series of MONEX20
stock exchange index. The final part of the paper presents conclusions of the analysis.
Key words: capital market, stock exchange index, risk, stationarity, historical volatility.
1
2
Faculty of Economics, University of Montenegro, e-mail: [email protected]
Faculty of Economics, University of Montenegro, e-mail: [email protected]
34
Tamara Backović i Vesna Karadžić
1. INTRODUCTION
The actual development of capital market in Montenegro started in 2001. It was
the time when the mass voucher privatization of the state-owned companies was
still in the process of being completed. The main precondition for capital market
development in Montenegro was the foundation of a stock exchange.
Montenegro Stock Exchange was established in June 1993, on the bases of the
Law on Money and Capital Market. In July 1995 Montenegro Stock Exchange harmonized its business activities in compliance with the Law on stock exchange, stock
exchange activities and agents. Montenegro Stock Exchange obtained founding
license from the Federal Ministry of Finance, license for trading with short term
securities from Yugoslav Central Bank and license for trading with long term securities from Federal Securities Commission.
Since September 2006 the Montenegro Stock Exchange has been entirely privately owned company due to the fact that the Government of Montenegro sold its
5% stake in Montenegro Stock Exchange by the auction sale on the stock market.
For this package, the price was € 1,100.00 per share, or five times more than the
nominal value, representing a market capitalization of the Stock Exchange of € 1.4
million.
Even though the first stock exchange in Montenegro was founded in 1993, the
first trade with long term securities was realized only after the Parliament passed
the Law on Securities in 2002. The Law on Securities regulates the terms and conditions for issuance, public offering and trading of securities, the rights and obligations of participants in the securities market, and the organization, scope and
powers of the Securities Commission.
The New Montenegrin Stock Exchange (NEX Montenegro) Podgorica was
founded in September, 2001. In November 2001 it was given the authorization for
work by the Montenegrin Securities Commission.
Until the end of 2010 Montenegro has had two stock exchanges: Montenegro
Stock Exchange and NEX Montenegro Stock Exchange. In January 2010, stockholders in NEX approved a merger with the Montenegro Stock Exchange. The merger
After the merger NEX Montenegro was established whose principal stock exchange indexes are MONEX20 and MONEXPIF. The starting value of MONEX20
index on January 1st 2011 was 14,522.53 stock market points, and the starting value
of MONEXPIF index was 6,595.82 stock market points.
The Securities Commission (SCM) is the market regulator in Montenegro. The
SCM was founded in 2000 and it took over the jurisdiction from the Yugoslav Federal Commission for Securities and Financial Markets. The SCM has the authority to
enact implementing provisions to the Law on Securities, to approve and supervise
public offers of securities, to license and supervise securities markets participants,
to authorize and regulate collective investment schemes, to regulate the manner
and scope of the trading in the securities market and to regulate takeovers.
Montenegrin capital market characteristics based on financial time series analysis
35
According to the Securities Law, trading of securities can be performed only at
the official stock exchanges; therefore no OTC market exists in Montenegro. The
bond market in Montenegro is limited to issuing T-bonds and T-bills by Central
Bank of Montenegro and therefore it is undeveloped. Hence, it can be concluded
that the capital market in Montenegro is actually the stock market.
2. THE METHODOLOGY
The standard procedure of the time series analysis will be applied to Montenegro stock exchange index. Empirical work based on time series assumes that the
underlying time series is stationary. That is why the first step in financial time series
analyses is to run the test of stationarity. The stationarity is an essential property in
defining a time series process. Stationary time series is the one whose parameters,
such as mean, variance, autocorrelation, etc. are all constant over time. Most business and economic time series are far from stationary when expressed in their original units of measurement, and even after deflation or seasonal adjustment they
typically still exhibit trends, cycles, random-walk, and other non-stationary behavior. Nonstationarity can have important consequences for regression models and
inference. Autoregressive coefficients of non-stationary time series are biased;
t-statistics have non-normal distributions even in large samples and regression
models of those series are usually spurious regression. Stationarity can be tested by
using several tests such as Dickey-Fuller test, augmented Dickey-Fuller test, Phillips-Perron test, Kwiatkowski–Phillips–Schmidt–Shin test and Run-test. In this paper the ADF test and Run-test were used to check the stationary of the stock exchange index MONEX20. If the test indicates that the MONEX20 time series is a
stationary one that means that the Montenegrin capital market follows predictable
path. This would be a negative sign for one capital market because if the market
returns can be predicted than the market is not efficient and transparent.
Volatility is another main characteristic of most financial time series. It means
that the expected value of error terms at some times is greater than at others.
Moreover, these risky times are not scattered randomly across quarterly or annual
data. Instead, there is a certain degree of autocorrelation in the riskiness of financial
returns. Market volatility estimation is important for most investors as well as traders. Investors use volatility measure to calculate the risk of their investments. On
the other side, traders use information on volatility estimation to anticipate how
volatile will be specific stock or market index in a future. There is a strong relationship between volatility and market performance. Volatility tends to decline as the
stock market rises and it tands to increase as the stock market falls. When volatility
increases, risk increases and returns decrease.
3. EMPIRICAL ANALYSIS
The most important reference for the research was the index data series,
MONEX20 attained from the Montenegro stock exchange. The data are given on a
36
daily level for the period from January 5th 2004 until May 26th 2014. The sample
consists of 2702 observations. Empirical analysis focuses on capital market efficiency tests and historical volatility estimation.
3.1. Testing the Montenegrin capital market efficiency
The capital market of Montenegro is a small market. Therefore it has a high
response to changes in the business environment, but because of its size revival will
neither be quick nor simple. At the beginning of every crisis, investors take out their
money from the capital market and the first to feel the pressure are small, emerging
markets.
If a capital market is efficient it can attract foreign investments. Since everyone
has the same information about a stock, the price of a stock should reflect the
knowledge and expectations of all investors. Consequently, an investor should not
be able to receive an abnormal return since there is no way that he could know
something about a stock that isn't already reflected in the stock's price. This research will present the results of a non-parametric test in an econometric investigation
of the capital market efficiency in Montenegro.
The phenomenon such as white noise and random walk are always connected
with the idea of market efficiency. Investors react instantaneously to any informational advantages they have and no profit can be made from information based
trading.
Random walk theory claims that stock market can be analyzed as random walk
according to next three facts:
1) efficient market responds very fast to new information;
2) if share price is a reflection of all available information, it is impossible to
use those information for market prediction;
3) it is impossible to predict market movement other than randomly.
There are quite a number of direct and indirect tests as evidence for or against
the EMH. Simon Keane (1983) provides some basic explanations of what makes
markets inefficient. His very popular idea is called “Gambler’s Fallacy”. It can be
explained as the belief that “what goes up must come down”. This phenomenon
exhibits itself amongst investors whose stocks’ price has risen for a period of time
and so is deemed to be “due for a fall”. Generally speaking, by knowing the relationship of the current price to recent price movements, one can better estimate the
likely direction of future price movements, i.e. historical data on a price movement
can be used to predict future prices. This provides credibility to the argument that
the market is predictable and inefficient. Therefore, the task is to see whether the
stock market is predictable or not by detecting serial dependence of stock returns.
The Montenegrin capital market is considered as an emerging capital market.
Therefore, only weak form of market efficiency3 will be tested. We test whether
3 American economist, Eugene Fama, has proposed three types of efficiency: weak form, semi-strong
form and strong efficiency. Weak form efficiency claims that all past prices of a stock are reflected in
37
share prices follow a random walk. If analyzed time series follow random walk they
are nonstationary so it could be concluded that they are unpredictable. In that case
capital market is indicated as an efficient one.
Three very popular tests of market efficiency are applied in this paper – Augmented Dickey-Fuller (ADF) test, Run test and Autocorrelation Function (ACF) test.
Augmented Dickey–Fuller (ADF) test is the most popular stationary test.. ADF test
is used to test the unit root hypothesis. If a time series has unit root than it is nonstationary and it follows random walk. The test is based on two possible equations:
Yt  Yt 1  u t
(1)
After subtraction of Yt-1 from the left and the right side of equation, the equation can be written in the next form:
Yt  Yt 1  Yt 1  Yt 1  u t  Yt  (   1)Yt 1  u t  Yt  Yt 1  u t
(2)
where null hypothesis can be defined on two ways: H0: =0 or H0: =1. But the
basic assumption of ADF test is that the error term ut is a white noise.
To test whether ADF test can be applied to return on MONEX20 we estimated
the following model:
RTMONEX 20 t  RTMONEX 20 t 1  ut
(3)
where RTMONEX20 represents the return on stock market index MONEX 20.
Return on stock market index was calculated by using the following formula:
RTMONEX 20t  ln(
MONEX 20 t
)  100
MONEX 20 t 1
(4)
In order to test weather error term is a white noise, the first step in ADF test
application is to estimate equation (1). The results of estimation are given in the
following table:
Table 1: The random walk model of return on stock market index MONEX20
Dependent Variable: RTMONEX20
Variable
RTMONEX20 (-1)
Coefficient
Std. Error
t-Statistic
Prob.
0.216642
0.018789
11.53024
0.0000
today's stock price. Therefore, technical analysis cannot be used to predict and beat a market.
Semi-strong efficiency implies that all public information is calculated into a stock's current share price,
i.e. meaning that neither fundamental nor technical analysis can be used to achieve superior gains.
Strong form efficiency is the strongest version of market efficiency. It states that all information in a
market, whether public or private, is accounted for in a stock price. Not even insider information could
give an investor the advantage.
38
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
0.045196
0.045196
0.016415
0.727830
7270.485
2.001778
Mean dependent var
S.D. dependent var
Schwarz criterion
0.000713
0.016799
-5.380818
-5.378634
-5.380028
The coefficient next to lagged RTMONEX20 variable is significantly different
from 1 which is the first sign that the analyzed series doesn’t have a unit root and
hence, it is stationary. Next step is to test for serial correlation of residual in the
previously estimated model.
Table 2: Breusch-Godfrey Serial Correlation LM Test
Breusch-Godfrey Serial Correlation LM Test:
F-statistic
Obs*R-squared
0.009337
0.000000
Prob. F(2,2699)
Prob. Chi-Square(2)
0.9907
1.0000
Test Equation:
Dependent Variable: RESID
Included observations: 2702
Presample and interior missing value lagged residuals set to zero.
Variable
Coefficient
Std. Error
t-Statistic
Prob.
RTMONEX20(-1)
RESID(-1)
RESID(-2)
0.017477
-0.018043
-0.001360
0.396116
0.396625
0.087935
0.044120
-0.045491
-0.015470
0.9648
0.9637
0.9877
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
-0.001148
-0.001890
0.016421
0.727825
7270.495
2.000702
Mean dependent var
S.D. dependent var
Schwarz criterion
0.000557
0.016406
-5.379345
-5.372792
-5.376975
The Breusch–Godfrey serial correlation LM test as a test for autocorrelation in
the errors in a regression model shows that the serial correlation is not present.
According to the results of this test we fail to reject the null hypothesis of no serial
correlation with the probability of aproximately 100%. Therefore ADF test is appropriate for the investigation of RTMONEX20 time series stationarity.
39
Table 3: ADF Unit Root test for return rate on index MONEX20
Exogenous: None
Lag Length: 0 (Automatic - based on SIC, maxlag=27)
t-Statistic
Augmented Dickey-Fuller test statistic
1% level
5% level
10% level
-41.69231
-2.565818
-1.940941
-1.616621
Prob.*
0.0000
The value of ADF test statistics is -41.69231 and it is significantly smaller than
the critical test statistics values at 1%, 5% and 10% significance level. Hence, we
reject the Null hypothesis. Time series RTMONEX20 is stationary and it doesn’t
have a unit rot. Accordingly we reject the hypothesis of weak form efficiency for the
capital market in Montenegro.
This results testify that the capital market in Montenegro is not transparent, i.e.
not all relevant information are reflected in the stock price and there are participants who can gain the abnormal profit by having more information than others.
The Run test, also known as Geary test, is a non-parametric statistical test
whereby the number of sequences of consecutive positive and negative returns is
tabulated and compared against its sampling distribution under the random walk
hypothesis. A run is defined as the repeated occurrence of the same value or category of a variable. It is indexed by two parameters, which are the type of the run
and the length. Regarding the type stock price runs can be positive, negative, or
have no change, while the length defines how often a run type occurs in succession.
Under the null hypothesis that successive outcomes are independent, the total expected number of runs is distributed as normal with the following mean:
E ( R) 
n  2n A n B
n
(5)
and the following standard deviation:
R 
2n A n B ( 2n A n B  n)
n 2 (n  1)
(6)
where n is the total number of observations, nA is the number of the first run
cycle, and nB is the number of the second run cycle. Number of runs is marked with
R. If the number of observations is large its distribution is almost equal to normal
40
distribution. The test for serial dependence is carried out by comparing the actual
number of runs, ar in the price series, to the expected number μ.
The formula for standard score is:
Z
R  E ( R)
R
(7)
If calculated Z value is greater than critical value with appropriate significance
level, than we can reject Null hypothesis and conclude that analyzed MONEX20
stock index cannot be predicted. In that case capital market of Montenegro will
satisfy weak form of market efficiency.
Table 4: Run test applied to return on index MONEX20
R
Z=0.01
Hypothesis
0.17
±2.58
H0
7.89
0.06
±2.58
H0
130.07
7.99
-3.26
±2.58
Reject H0
73
125.20
7.76
-6.73
±2.58
Reject H0
263
102
132.48
8.09
-3.77
±2.58
Reject H0
156
261
103
126.52
7.75
-3.03
±2.58
Reject H0
138
141
279
139
140.48
8.34
-0.18
±2.58
H0
2011
125
135
260
123
130.81
8.03
-0.97
±2.58
H0
2012
124
129
253
131
127.45
7.93
0.45
±2.58
H0
2013
104
122
226
129
113.28
7.45
2.11
±2.58
H0
2014
57
47
104
48
52.52
5.03
-0.90
±2.59
H0
God.
nA
nB
n
R
E( R )
2004
102
157
259
126
124.66
7.67
2005
112
148
260
129
128.51
2006
119
141
260
104
2007
107
148
255
2008
130
133
2009
105
2010
Z
According to our results capital market of Montenegro is weak-form efficient in
4 out of 11 analyzed years. Capital market of Montenegro is inefficient in the first
two and the last five years of analysis.
It is reasonable to assume that recent financial crisis has had grate impact on
capital market efficiency. This is why we aply Run test for two sub-periods:
pre-crisis and crisis period.
Table 5: Run test applied to return on index MONEX20 before and during the
world financial crisis
nA
nB
N
R
E( R )
R
Z
Z=0.01
Hipothesis
2004-2007
440
594
1034
431
506.53
15.71
-8.37
±2.58
Reject H0
2008-2014
884
783
1667
770
831.44
20.33
1.85
±2.58
H0
41
The results of Run-test suggest that the Montenegrin capital market was efficient before the world financial crisis. The efficiency was not achieved in the period
of the crisis which is expected by the theory. On the other hand, efficiency in the
period from 2004 to 2007 can be explained by the process of privatization in Montenegro which was identified as well organized and transparent one. In fact, almost
all state-owned companies were privatized in this specific period. In the 2004-2007
period total value of stock-exchange market turnover was 1,343,958,943.8870 € and
total number of transaction was 504,892. In the crisis period, from 2008 until the end
of analized period, the value of market turnover was 712,066,321.2584 and the
number of transaction was 187,291. Comparing the values of market capitalization
in these two sub-periods one can conclude that this value was significantly higher
in the pre-crisis period. Significant difference in statistics of capital market in
Montenegro in the period before and after 2008 can be explained by the lack of
transparency on capital market in the period marked as inefficient and with the
abnormal profits gained by some of the participants on the market.
autocorrelation in a time series. It measures the correlation between the current and
lagged observations of the time series of stock returns.
If time series has unit root, than the autocorrelation function slowly decreases
starting from the value of one and the partial correlation function has only first
value which differs from zero. If one time series has two unit roots, ACF act the
same way as for the one unit root series, but the PACF has only first two nonzero
values. Based on the results of correlogram, ACF and PACF statistics we conclude
that the return on MONEX20 index represent stationary time series. The correlogram as well as the values of ACF and PACF decrease slowly with very small ACF
and PACF values which all implies that the analyzed series is stationary. Stationary
goes hand in hand with inefficiency of Montenegrin capital market.
3.2 Volatility measure
In finance, volatility is a measure of variation of price of a financial instrument
over time. It is usually measured by the standard deviation from the expectation.
Any price movement up or down from its expectation is the volatility. Historically,
the volatility of a stock market is roughly 20% a year and 5.8% a month, but volatility keeps on changing, so we go through periods of high volatility and periods of
low volatility. The biggest driver of volatility is a drop in the market. Volatility implies high risk of market and it can scare investors and cause the collapse of financial market.
In theory two types of volatility are recognized: historical volatility and implied volatility.
Implied volatility is what the market expects for a stock's price movement. If
implied volatility is high, the market expects the high range of stock price movement. On the other hand, low implied volatility suggests smoother stock price
movements within a limited price range.
42
Table 6: Correlogram for time series return on index
Sample: 1/05/2004 5/26/2014
Included observations: 2705
Autocorrelation
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Partial Correlation
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1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
AC
PAC
Q-Stat
Prob
0.215
0.048
0.013
0.071
0.088
0.036
0.022
0.053
0.088
0.056
0.023
0.046
0.020
0.067
0.061
0.060
0.009
-0.013
0.029
0.051
0.032
0.010
0.030
0.042
0.025
-0.005
0.007
0.024
-0.004
0.011
0.034
0.025
0.054
0.029
0.027
0.014
0.215
0.002
0.002
0.072
0.061
0.001
0.012
0.045
0.062
0.017
0.002
0.036
-0.011
0.052
0.032
0.033
-0.022
-0.027
0.023
0.027
0.003
-0.002
0.020
0.014
-0.002
-0.018
0.009
0.008
-0.028
0.009
0.028
0.004
0.044
0.008
0.009
-0.005
125.30
131.61
132.03
145.86
166.98
170.43
171.69
179.28
200.53
209.13
210.51
216.19
217.25
229.52
239.62
249.42
249.66
250.12
252.37
259.44
262.18
262.46
264.88
269.63
271.33
271.41
271.53
273.16
273.20
273.56
276.78
278.52
286.62
288.99
290.95
291.50
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
43
Historical volatility measures the stock price changes in the market and translates it into a statistical measure of variance. Historical data of stock prices are used
to calculate volatility.
In this paper we use historical volatility concept. Historical volatility calculation is based on the time series representing the return on stock market index
MONEX20. We calculated its average day-to-day changes (Rm) over a specific period. Than historical volatility is the average variance of return on stock market
index MONEX20 from the mean, and can be estimated as:
HV 
 ( RTMONEX 20  Rm)
2
n 1
(8)
To annualize the historical volatility, the above result is multiplied by the
square root of 252 because this is the average number of trading days in a year.
Graph 1: Results of annual historical volatility for analyzed period
Analysis of the historical volatility data indicates that volatility of capital
market in Montenegro rose from year to year in the period 2004 to 2008 and the
highest value was reached in the year of 2008. However, in the crises period volatility declined which is connected to market stability and previously proven market
efficiency.
If we analyze the last value of historical volatility we can conclude that the return on stock market index MONEX20 in the first part of 2014 will increase or decrease for 8.02% from the annual average rate of return. The average annual rate of
return on MONEX20 stock index for the last year of this analysis is -0.00781%. If we
consider calculated historical volatility for the year of 2014it can be expected that
the rate of return on index MONEX20 will have value from -0.0072% to -0.0084%.
Even though the expected future rate of return is negative, the stability will be
the main characteristics of capital market and that is a good signal to attract investors and investments.
44
4. CONCLUSION
The goal of this paper was to examine main characteristics of capital market in
Montenegro. To do that we employed tests for market efficiency as well as volatility
estimation.
Efficient-Market Hypothesis is a cornerstone of modern financial theory. Researches in this field of economy have significantly contributed to the understanding of the stock market, although the present state of understanding the issue,
especially in the emerging financial markets, is far from being conclusive.
Our research focused only to tests of weak-form efficiency. Despite the fact
that Montenegrin capital market was inefficient in the period before the world financial crisis, ADF and Run test approved that in the past few years there was a
weak form of efficiency on the capital market in Montenegro. Even though it is
generally assumed that the emerging markets are less efficient than the developed
ones it ca be concluded from our test results, that the capital market in Montenegro
has becomed more developed, transparent and therefore efficient. That should be a
good signal for investors and investment attraction.
The other good characteristic of the Montenegrin capital market, indicated by
our results, is a low volatility which assumes that in a near future capital market in
Montenegro will be stable one with the low level of risk for participants’ investments.
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