Stamp prices and the investment hedge effect : a view from China postal market

Abstract

Stamp is a special asset that is different from traditional financial securities. It can be a good investment in addition to be a collector's item.When the market is volatile, instability is significantly enhanced and investor confidence in the market suffers. Can stamps be used as a hedge investment for funds? During the 2008 financial crisis, stamps as a collectible became a safe-haven for funds. The uncertainty of the market brought about a brief boom in the stamp market. The electronic stamp card market is a new attempt to develop the stamp market. It has important value in hedging investment risks and enriching investment portfolios. This paper uses the event study method to demonstrate that stamp investment can be used as an effective means of capital hedging. The paper verifies the impact of the 2008 financial crisis on Chinese spot stamp market prices and the impact of the 2015 stock market crash on online electronic trading. This paper investigates the factors influencing stamp prices and returns using a linear regression analysis model. The effects of characteristic attributes such as stamp type, stamp printing method, stamp material, stamp subject matter, the size, age, face value on stamp prices and yields are analyzed. The pricing of stamps is different from that of stocks and bonds. In this paper, we first study the price indices of the spot market and the Chinese electronic stamp market, mainly using the hedonic model for stamp prices. This paper also gives the results of the construction of price indices using the fixed portfolio price index method and the repeat sale method. Two major increases of the stamp price index in the spot market have occurred, the first in 2008 and the second in 2015. For the stamp prices in the spot market and the stamp prices in the electronic market, this paper analyzes the characteristics of the attributes affecting the stamp prices based on the hedonic model. Stamp issue volume is the key characteristic variable affecting stamp prices, with each 10% increase in stamp issue volume decreasing stamp prices by 5.63%. By stamp type, special stamps and commemorative stamps have higher price levels. In terms of printing method, traditional photographic stamps have a higher price level. By stamp subject, the price level of zodiac stamps in the spot market was 253.7% higher compared to other types of stamps and 8.3% higher for zodiac stamps in the electronic market. From a collector's perspective, the Zodiac features are accompanied by richer collector significance, which not only makes the stamps more expensive, but these features also make the stamps more profitable to hold. From the perspective of stamp size and age, larger stamp sizes are instead less popular with stamp collectors. This paper also analyzes the effect of stamp age and face value on stamp prices. Regarding the study of electronic trading prices, this paper highlights the role of trading time in the electronic trading model to gain value added in a shorter period. We find that the duration of public trading of stamps in the market has a significant impact on the rate of return. After the stamps are first listed, the yield shows a faster upward trend, but as the public trading lasts longer, the price of the stamps gradually becomes steadier. The electronic trading model brings stamps into the choice of investors. The longer the stamps are present in the market, the more the trading community in the market gradually stabilizes and the stamps yield decreases as a result. This paper uses an event study approach to demonstrate the value of stamps as a safe-haven investment option during a crisis. Firstly, we study the impact of the 2008 financial crisis on the stamp spot market, which the paper defines as a financial crisis shock event with Lehman Brothers filing for bankruptcy. The yield of stamps itself is affected by its own characteristic properties. This paper distinguishes between the function of different stamp types as a hedge investment vehicle for capital during the financial crisis. T-type stamps and J-type stamps are more in line with the investment needs of investors and are more responsive to the financial crisis. In contrast, small booklet stamps, which have a higher proportion of collector significance, do not meet investors' capital hedging needs during the crisis and thus did not respond significantly to the 2008 financial crisis. This paper finds that: in the face of increased market uncertainty, investors prefer zodiac stamps with high turnover frequency, making them have higher abnormal returns during the financial crisis. During the financial crisis, investors' confidence in the market was undermined and they sought to find effective ways to hedge their capital. The frequency of stamp turnover and holding yield are two aspects that investors focus on when turning to stamp investments. In addition, using trading data from the SSE, this paper also examines the linkage between stamp market and stock market returns, demonstrating that stamp investment serves as an effective means of risk hedging and verifying that the risk hedging function of stamp investment changes over time. This paper examines the linkage between postal market and stock market volatility and shows that in normal times, stamp investment provides investors with a hedge against inflation and profitability. However, during the "stock market crash", this function is overshadowed by the wealth effect. The results of the empirical analysis show that the return on stamps and the market risk-free rate of return are significantly correlated, and the lower the yield on short-term government bonds, the higher the return on the stamp market. The fluctuation of the price of stamps on the electronic market of the South China Stock Exchange shows a negative correlation with the fluctuation of the price of the mainland stock market, and when the stock market yields in both Shanghai and Shenzhen increase, the yield of stamps decreases instead. Even after excluding risk factors such as market capitalization and book-to-market ratio, a negative correlation between stamp market and stock market returns can still be found. But there is no significant correlation with Hong Kong stock exchange returns. This paper suggests that this is because stamps are a substitute for small-cap stocks held by mainland investors. We found that stamp investments also serve as a hedge against the risk of large-cap stocks and bonds when stock returns are normally volatile. Further research in this paper shows that this linkage does not always exist, and that this negative linkage between the stamp market and the stock market disappears when there is a large stock market decline, i.e., during a "stock market crash". Under this context, the wealth effect masks the risk-hedging function of stamps as investors' wealth is impaired by a large stock decline. function.