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This dissertation comprises three empirical studies on the equity and foreign exchange markets of emerging economies. The motivations for these three studies evolve around the issue of financial liberalization in emerging markets. Specifically, the first empirical study examines the impact of financial liberalization on the volatility of equity returns in the emerging markets. Building on different GARCH models, the chapter shows that volatility could decrease, increase or be unchanged post financial liberalization depending on the level of domestic institutional quality and market characteristics. The analysis shows that volatility is prone to increase (decrease) for a country with low (high) quality of institution and market characteristics. The second study investigates the Uncovered Interest Rate Parity Hypothesis (UIP) for emerging countries. Considering economies that adopt relatively open capital account and free floating exchange rate regimes, both dynamic time series and panel analysis suggest that the coefficient of interest rate differential on the UIP regression is positive and close to unity at longer horizons. The evidence is robust for different base countries (US, Germany or Japan). The third empirical study examines the hypothesis that claims that the exchange rate movements are possible to be predicted in the economies that are fundamentally unstable such as emerging economies. Employing the Vector Error Correction Model (VEC) under the bootstrap techniques proposed by Killian (1999), the findings provide for the evidence of exchange market predictability in emerging economies.

This thesis investigates equity home bias from an asset allocation perspective in emerging markets. Firstly, a review of equity home bias in modem finance literature is presented, followed by a discussion of the relative strengths and weaknesses of international asset pricing and optimal allocation models. Secondly, the thesis tests static and conditional Capital Asset Pricing Models (CAPMs) for 23 emerging markets over the period February 1997 - December 2007. The study reveals little support for the static CAPM compared to the conditional version; in which the conditional CAPM seems to explain excess returns' dynamics and implies higher volatility persistence in emerging markets compared to developed markets as documented in the literature. Accordingly, the study employs a modified trivariate generalised autoregressive conditional heteroscedasticity (GARCH) model for the period April 1994 - July 2008, in order to estimate time-varying optimal weights in a portfolio of three assets; namely the return on the domestic index, the return on the US index, and the return on the UK index. The number of assets in the portfolio is increased to reach 13 assets in some markets through the estimation of the Dynamic Conditional Correlation (DCC) model denominated in local currencies and in US Dollars. The three models show that the optimal weights on domestic equities divert substantially from the actual equity holdings as documented in survey reports; in addition to the effect of including more assets in the portfolio, and the influence of exchange rate risk on optimal weights. Lastly, the thesis examines the variables that influence equity domestic holdings through the panel estimation of the feasible Generalised Least Squares (GLS) method in order to control for heteroscedasticity. The study suggests that factors related to information asymmetries, economic risks at home, exchange rate volatility, and markets' inefficiencies are the main factors affecting equity domestic bias in emerging markets.

The purpose of this thesis is to empirically investigate the micro and the macro determinants of bank fragility in the North Cyprus economy over the period 1984-2002 using a multivariate logit model and logistic survival analysis. The empirical methodology employed in this analysis allows for the distinction between the determinants of the likelihood of bank failure and the survival time. Firstly, the model links the probability and the timing of banking problems to a set of bank-specific factors, then following the identification of bank-specific variables, the approach proceeds by combining these banklevel factors with the macro-environment that may have exacerbated the internal troubles of the financial institutions. The macro factors considered in the analysis are macroeconomic characteristics, financial and structural weaknesses, external shocks and potential contagion effect from Turkey.;The empirical findings suggest that capital inadequacy, low asset quality, low profitability, low liquidity, small asset size, a fall in the real GDP growth, high inflation, rising real interest rates, high credit expansion to public and private sector, a sharp increase in the real exchange rates, adverse trade shocks and high budget deficit, the ratio of M2 to foreign exchange reserves, implicit/explicit deposit insurance, financial liberalization, weak regulation and supervision and external shocks and exchange rate pressure on Turkish Lira played an important role in the escalation of the 2000-2002 banking distress in North Cyprus. Moreover, an empirical examination of the results for survival analysis reveals that low leverage, low liquidity and high credit that extended to the private sector are the main determinants of the time to banks failure in North Cyprus.;Keywords: North Cyprus economy, banking sector, bank fragility, logit, survival.

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This doctoral thesis inductively explores the role of conventional social behaviour adopted by individual microfinance clients regarding their influence over their own collective success as a microcredit group. The collective credit in question is subject to an adaptation in Mexico of the Grameen Bank lending framework. An analysis is made on the close interplay between institutional rules, i.e. the repayment conditions imposed by the microfinance institution (henceforth MFI), and the emergent cooperation and penalisation mechanisms that are handled by clients themselves to meet their targets. Thus the research is focused on the clients’ strategies to socially manage debt and defaulters. In this case study, a socio-economical fieldwork has been completed through surveying 600 microcredit clients, their 2404 active loans, 35 credit officers plus their board of directors. This took place in the southernmost state of Mexico, Chiapas, from September 2007 to February 2008, and data analysis was carried out during that period until July 2009. All findings were discussed with relevant stakeholders and policy makers. This proved key in providing influential insights that helped to improve the institutional regulatory framework. That resulted in a policy change that benefited over 20,000 clients. Apart from institutional regulations, it has also been observed group-level strategies devised by microfinance clients themselves to assess and deal with defaulters over time. These operate independently from the MFI framework as, despite influencing when and how quotas should be repaid, their criteria is entirely dealt with and evolved within credit groups. The obtained outcomes from analysing social and financial data include: • (I) insights backed by empirical data helped to influence an adaptation of the MFI funding credit policy, so that group structure and conventions are actually taken into consideration in a bid to foster more successful microcredit groups; • and (II) an analysis deemed reliable by the stakeholders for policy-making purposes, which has also guided the development of an exploratory model for simulating behaviour of how microcredit groups may deal with repayments in adversity. As a result of having developed this research project, three contributions to knowledge are discussed in the thesis. These are organised below according to relevant topics. 1. Understanding the behaviour within studied microfinance groups: based on the analysed evidence, a hypotheses is suggested about how group location and membership can influence the dynamics of acceptable behaviour regarding defaulters. 2. Informing policy-making with research findings: a demonstration of how stakeholders can assess the usefulness of knowledge –produced via research– for policymaking purposes, taking into account the phenomenon’s particular context. 3. The development of an agent-based model (henceforth ABM): application of the proposed ABM methodology, aimed at strengthening validation throughout the modelling process with emphasis on use of evidence and stakeholder participation.

Throughout the 1980s, information technology gained increasing importance within commercial banks. There have also been turbulent competitive developments in the retail banking market caused by non-banks making inroads into traditional banking business. This research examines whether there is a direct correlation between significant changes in the market environment of commercial banks and significant changes in the banks' information technology strategy. The research develops an understanding of this complex relationship in two distinct retail banking markets, the USA and Germany, and in two steps. The first is a thorough literature analysis of the factors influencing the model, the market-entries of selected non-bank competitors, and banks' general strategic response. The second is a qualitative research on the banks' strategic response, in particular in terms of information technology. The change of the IT strategy is measured by the investments made by banks in information technology. The research finds that commercial banks responded with a time lag of 1 to 1.5 years to market-entries of a substantial competitive and strategic scale. They spent more than twenty percent of their information technology budget devoted to information technology investments in the retail banking function of their institution, to respond to the market-entry. Thus, a direct correlation seems to exist.

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