The promotion of Private Sector Participation (PSP) projects has increased significantly throughout the world over the last decade. This has been a consequence of the greater capacity and motivation of the private sector in providing finance to manage such projects. PSP projects in developing countries face significant challenges as the result of the threat from critical risks, which may cause sudden increases in costs and/or decrease revenues. These may provide obstacles to the growth of PSP projects, which are considered essential by most developing countries for economic growth. The appraisal stage is crucial in determining project viability. This research has proposed an appraisal mechanism, which may assist decision-makers seeking better solutions and clearer information in anticipating the occurrence of critical conditions. The Proposed Appraisal Mechanism for PSP Projects (PAM-PSPP) has been developed by utilising Risk Management (RM) and Value Management (VM) in conjunction with traditional appraisal techniques, such as IRR, NPV, benefits/costs ratio and Cost Benefit Analysis (CBA). Quantification of outputs from the mechanism is achieved using the @Risk and CASPAR software packages. This mechanism is designed to meet the requirements of PSP projects in developing countries and consists of five stages. The pre-study stage is used to define appraisal objectives based on project objectives, project characteristics, all key stakeholders' objectives, and the project environment. The information stage involves the collection and development of information associated with downside and upside risks. The optioneering stage generates options based on elements of the RM and VM techniques. The evaluation stage involves ranking of options based on three important criteria: (i) fulfilling economic viability as the involvement of private sector in PSP projects, (ii) obtaining sustainability over the project life cycle including securing the project from the threat of critical risks, and (iii) achieving value in term of accommodating the various interests of PSP project stakeholders and achieving value for money. The recommendation stage involves reporting and identification of preferred outputs. The application of PAM-PSPP in two project case studies in Indonesia has demonstrated its effectiveness in improving the viability of proposals. This was firstly derived from the use of RM in reducing the impact of common and critical risks. Secondly, it was helped by the use of VM in managing a reconciliation of all key stakeholders' objectives. This may potentially improve their motivation in providing support and commitments to the project during critical periods in order to secure the project from critical conditions and to sustain it over the project life cycle. Additionally, the use of VM may improve the achievement of value for money, which may potentially reduce the life cycle costs of the projects and may also increase revenues. In comparison to the previous appraisal methods, the PAM-PSPP has provided some contribution to improving the accuracy of risk analysis in relation to critical risks and providing the synergistic mechanism. The mechanism integrates the use of RM and VM in three loops learning processes of appraisal, and determines evaluating criteria based on economic viability, value, and sustainability

Financial markets have long been modelled on one primary assumption and that assumption is a linear relationship between factors involved in financial risk, return and prices. Given that linear models do not have a good track record of providing above average returns or even providing good explanations for market movements, market participants look for other ways of developing models which can provide above average performance and a much higher degree of explanation for market movements. There is now compelling evidence of nonlinearities in the financial markets. We use learning networks which is a non-linear, nonparametric model free modelling technique, to model a variety of international financial and commodity markets such as sixteen international equity markets, fifteen foreign exchange rates with respect to the US$, sterling interbank market including six maturities and Brent crude oil futures market comprising of the first six maturities, and provide above average returns with a significantly higher degree of explanation of market movements. The learning network model performance is evaluated on out - of - sample periods, during periods of high volatility and structural/regime change. The model evaluation basis is primarily percentage returns adjusted for transaction costs although usual error measures such as root mean square error, Thiel's U statistic etc. are also used. We also carry out a detailed analysis of the weight structure of the models and determine the important inputs to the models. This step we believe would remove the common objection that neural networks have a black box which makes it impossible to evaluate neural network applications. We determine clear non-linearities in financial and commodity markets and conclude that the markets are far more complex than previously thought.

Using monthly data of foreign flows on Istanbul Stock Exchange (ISE), the thesis finds that in contrast to most of the available theory and repeated previous findings on other markets, foreign investors act in a contrarian manner with respect to past local returns in ISE, however only in rising markets. The findings do not support the price pressure hypothesis; instead the price impact is permanent supporting the base-broadening and information hypotheses. The analysis on individual stocks suggests no evidence of informed trading, suggesting that, foreigners have no particular advantage in terms of domestic information in the ISE. Employing daily trading data from five emerging stock markets, namely the Jakarta Stock Exchange, Korea Stock Exchange (KOSPI), Stock Exchange of Thailand (SET), Taiwan Stock Exchange, and the Kosdaq Stock Market, this thesis documents that that in four out of five markets global risk appetite affects equity flows to emerging markets. Furthermore, foreigners’ trading with respect to local return is found to be different across high and low risk appetite levels in Indonesia, Kosdaq and the Kospi markets. Their trading with respect to local return is also found to be different across high and low states of the economy in KOSPI and SET. Finally, using a daily dataset from the Stock Exchange of Thailand, this thesis investigates whether foreigners react differently on the announcement of macroeconomic news, compared to local investors. It also addresses some serious econometric issues that have affected other papers in this area. Under this improved model, many reactions turn out not to be significant, particularly since the 1997-8 crisis. However, on hearing inflation news, foreigners do react in the opposite way to local individual investors. They will therefore tend to reduce any locally-induced volatility.

This thesis examines patterns in the FX returns and implied volatilities using daily return and implied volatility data for four major exchange rates for a period of January 1994 to December 2003. The existence of the patterns could indicate that the FX market is not efficient and could provide a basis for the construction of the trading strategies. Volatility tends to rise prior to the announcement of both scheduled and unscheduled news and fall on the announcement day. The "sign effect", indicated by the bad news having stronger impact on the volatility than good news, tends to weaken in post euro period. We find a strong evidence of the day of the week effect in the FX returns and implied volatilities, indicated by (i) positive Thursday and negative Friday returns, (ii) positive implied volatility changes on Monday and Tuesday and (iii) negative implied volatility changes on Thursday and Friday. The intraweek patterns have become more significant after the introduction of euro. We confirm the holiday and January effect that tends to strengthen in the "bad" years characterized by low GDP growth rate, and tends to weaken in the "good" years characterized by high GDP growth rate. We find a strong relation between implied volatility and contemporaneous returns, which is strongly affected by the news announcements, stronger for small returns and whose significance declines following the introduction of euro. There is also some evidence of the extreme levels of the implied volatility predicting following day returns, which is found to be particularly significant for negative (as opposed to positive) returns and for extremely large increases (as opposed to decreases)in the level of the implied volatility. The evidence presented in this thesis contributes to the existing research on FX anomalies, with the main contribution centring around a significant impact of euro.

This thesis studies the effects of the economic agents' reputation in mergers and acquisitions (M&As). Given their paramount importance in takeover situations, the three specific economic agents chosen to be examined are i) bidder financial advisors, ii) target firm auditors, and iii) members of the bidders' boards of directors. First, the results of the study shed new light on the role of bidder financial advisors in M&As. Contrary to prior studies, top-tier advisors are found to be associated with higher bidder returns relative to their non-top-tier counterparts but in public acquisitions only, where the advisor reputational exposure and required skills set are relatively larger. This translates into $65.83 million shareholder value enhancement for a mean-sized bidder. The improvement comes from top-tier advisors' ability to identify mergers with higher synergies and to get a larger share of synergies to accrue to bidders. Consistent with the premium price - premium quality equilibrium, top-tier advisors charge premium fees in these transactions. Second, the study documents several ways in which target firm auditor reputation affects M&A outcomes. Given more accurate financial statements of reputably audited targets, better bidder-target matches can be identified, while a lower discount rate is required to justify the risk of the projected cash flows of the combination, leading to higher NPV. It is found that synergies are, indeed, higher in such acquisitions. Premiums are independent of target firm auditor type, allowing bidders to capture the benefit of reputable audits. This benefit increases with information asymmetry faced by bidders. Bids for targets audited by reputable auditors are also more likely to succeed. Third, the study re-examines the effect of board structures on acquiring firms' returns. In contrast to prior work, the UK takeover market is used to exploit several appealing institutional characteristics that contribute to the power of the required tests. It is found that board structures of the nature introduced by the Cadbury Report are associated with higher acquirer returns, driven mainly by board independence, with the CEO/Chairman split having a smaller impact. These effects, however, are pronounced for public acquisitions only, consistent with the theories of information cost, and with greater director reputational exposure. The results of the three studies are broadly consistent with the reputational concerns of economic agents, and offer interesting and important implications for both academics practitioners.

To provide further evidences on jumps in asset prices, in this thesis we conduct an empirical analysis on high-frequency data from a stock index and consider the problem of identifying jumps at intraday intervals. Our approach generalizes two existing methods in the literature in terms of estimating spot volatility and of correcting for the spurious rejection problem due to multiple testing. The proposed procedure directly depends on a credible volatility model that we specify and calibrate from the index data. By simulating the volatility model, it is shown that a relevant parameter which governs the shape of the generalized extreme value (GEV) distribution determines the critical regions of jump tests. Empirical sizes of jump tests can then be held at nominal level approximately when the testing procedure is applied to high-frequency returns. We also study the dynamics of detected jumps and model their time-varying intensities with a linear self-exciting point process.

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Climate change has been influenced more by human activities now than previously. These influences are largely attributed to industries, whose activities can potentially produce enormous amounts of carbon dioxide and other greenhouse gases, and exacerbate the speed of climate change. This thesis examines how the financial markets evaluate corporations’ greenhouse gas emission performance. We consider various emission criteria, and distinguish between the better and worse performers in different emission policy regimes, including the US, the UK and the rest of the EU. The investigations have been conducted at three stages, presented in chapter 3, 4 and 5. Firstly, in chapter 3 we examine the carbon effects at the portfolio-level, where total return indices are our main concern. By adopting the long-short strategy, we report that investors in the UK and EU markets, can make an arbitrage profit at the lower cut-off levels, when applying various carbon screening policies and forming equally-weighted portfolios. However, no such profit opportunities can be achieved in the US market. We further consider the reason for such arbitrage opportunities, which is the link between corporate governance/management efficiency and different levels of carbon constraint. Secondly, in chapter 4, the carbon effects are investigated at firm-level, where firms’ financial market values act as the dependent variable. Our regression models are based on the Ohlson framework, which considers firms’ financial market value in relation to its accounting performance, and the ‘other information’, which in our case is the carbon emission performance. We find a significant relationship between the US firms’ values and their carbon emission performances; however, this relationship has been weakened for UK companies, and in fact becomes even unreliable for EU companies. Further, in order to explore the reason for this relationship, we have focused on energy efficiency and firms’ reputation that are associated with carbon reduction activities. The scale effects have also been discussed in this chapter, as the various deflators are adopted. Finally, in chapter 5, again at firm-level, cash flow expectation and cost of capital have been considered to possibly be the source that drives firms’ value. Cash flow expectation is measured at the short-, medium- and long- term, by profitability, earnings growth, and residual income growth rate, respectively. Two portfolios for each target parameters are constructed according to different carbon screening criteria at different cut-off levels, the differences between each pair of portfolios are then calculated and tested for significance. A sub-sample regression, which is based on the observations available from analysts’ earnings forecast, has been conducted for each of the three regimes. After matching the portfolio and regression results, we report that the implied cost of equity is only reduced for the less carbon emission firms, in regimes where more stringent carbon constraints are applied; whereas in regimes where less stringent carbon constraints exist, the less carbon emission firms have not gained any advantage through their implied cost of equity. Also, cash flow expectations indicate diverse outcomes for different time horizon and regimes. Furthermore, various market participants, such as governments, investors, distributors and clients etc, who could possibly influence firms’ carbon behaviour, have also been considered in association with their roles in reducing greenhouse gas emissions. Our work contributes to the existing literature through a wide ranging examination of major financial evaluation methods relating to emerging carbon emission issues.

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