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  • About
  • The Global ETD Search service is a free service for researchers to find electronic theses and dissertations. This service is provided by the Networked Digital Library of Theses and Dissertations.
    Our metadata is collected from universities around the world. If you manage a university/consortium/country archive and want to be added, details can be found on the NDLTD website.
91

Noise-augmented asset pricing models : evidence from the Greater China stock markets during two major financial crises

Lim, Chee Ming January 2017 (has links)
The main contribution of the thesis is the construction of noise-augmented asset pricing models. These models are the extension of Fama & French Three Factor Model (1992,1993) and subsequent improved version of Five Factor Model (2015), by adding a behavourial factor - investor sentiment (INVSENT). To the author’s knowledge, this is one of the first attempts to quantitatively reconcile risk based theory and behavioral finance by developing parsimonious asset pricing models for explaining value premium phenomenon, especially in the context of financial crises. Little research has been carried out on the value premium phenomenon over a short horizon during high volatility period. Previous empirical results show that over the long run, value stocks outperformed growth stocks, with considerable firm size effect. There are two competing schools of thoughts that explain the value premium phenomenon - risk based theories and behavior models. However, the occurrence of the Global Financial Crisis and Eurozone Crisis has opened a new and alternative window to study the value premium phenomenon and further examine the underlying reasoning. Firstly, in examining the risk and return relationship of value stocks and growth stocks of the Greater China stock markets during the two major financial crises, it show that growth stocks outperformed value stocks during both the Global Financial Crisis and Euro Zone Crisis in the China and Hong Kong stock markets. However, value stocks outperformed the growth stocks in the Taiwan stock market during the Global Financial Crisis and Euro Zone Crisis. The small size effect did not really diminish in the Greater China stock markets during two major financial crises. Also, standard risk measures – standard deviation and Sharpe ratio do not fully explain the risk and return relationship of these two stock selection strategies. Secondly, in explaining value premium under the Banko, Conover and Jensen Model (2006), mixed results are observed. During the Global Financial Crisis, industry book-to-market ratio is a strong signal in the China and Hong Kong stock markets, whereas the firm book-to-market ratio is a strong signal in the Hong Kong and Taiwan stock markets. Further analysis at the industrial level has revealed that industry book-to-market ratio is a more prominent factor than the firm book-to-market ratio. During the Euro Zone Crisis, the firm level book-to-market ratio is significant the Hong Kong stock markets, even after controlling for market capitalisation and beta. The study under the Fama and French Three Factor Model (1992, 1993) has shown that the three risk measures - market risk premium (MRP) factor, SMB factor and HML factor are semi-strong signals in explaining value premium in the Greater China stock markets during the two major financial crises. Furthermore, the investigation under the Fama and French Five Factor Model (2015) has shed light that the five risk measures - market risk premium (MRP) factor, SMB factor, HML factor, profitability factor (RMW) and investment factor (CMA) are semi-strong signals. Considering the values of adjusted R-squared and varying signals of the risk measures, it is argued that risk factors of the three asset pricing models do not fully explain value premium phenomenon in the Greater China stock markets during the two major financial crises. Thirdly, the study under the noise-augmented capital asset pricing models reveals that the investor sentiment (INVSENT) factor is a statistically significant determinant of the stock returns in the Hong Kong stock markets during the Euro Zone Crisis. The investor sentiment (INVSENT) factor is only weakly significant or insignificant statistically in the China and Taiwan stock markets during these two financial crises. For the risk measures in the Fama and French’s models, market risk premium (MRP) factor, SMB factor, HML factor, profitability factor (RMW) and investment factor (CMA) are semi-strong signals. The adjusted R-squared values of the noise-augmented asset pricing models are higher than the original Fama and French models. The findings of this research are expected to provide a fresh insight to the investment managers in the asset allocation and portfolio management decision. The practical implication is that when investing during the period of financial crises, one has to firstly, be selectively in stocks and hence businesses involved, relying on the principles embodied in the risk based model – Fama and French Five Factor Model. Then, be aware of the mispricing caused by the investor sentiment. The mispricing may present opportunities for contrarian investment strategy.
92

The development of the EU regulatory and supervisory framework applicable to UCITS : a critical examination of the conditions and limitations of mutual recognition

Buttigieg, Christopher January 2014 (has links)
The thesis examines the conditions and limitations of mutual recognition and seeks to identify the lacunae in the governance mechanism and the regulatory framework applicable to undertakings in collective investment in transferable securities (‘UCITS'). It assesses the regulatory and supervisory mechanisms that may be applied to address the identified weaknesses. For this purpose, the thesis formulates a theoretical framework for effective mutual recognition based on quasi-maximum harmonisation, reflexive governance of financial supervision and a mechanism for the strengthening of mutual trust between national financial supervisors. The technique for financial regulation in the field of UCITS should create the right balance between implementing a policy designed to attain a high degree of harmonisation of investor protection regulation and making exceptions to address national differences. The picture that emerges is one where a model based on minimum harmonisation causes serious limitations to mutual recognition in the form of inconsistencies in the implementation of EU Law and the application of national discretions. Quasi-maximum harmonisation becomes the optimal technique for UCITS. However, the limitations of a model based on minimum harmonisation of regulation resurface, although to a lesser extent, even in a framework based on quasi-maximum harmonisation. The solution is not one where an even higher degree of harmonisation (the single rulebook mechanism) is required, but lies in reflexive governance of financial supervision combined with a framework for the strengthening of mutual trust between national financial supervisors. This framework can form the basis for overcoming the remaining obstacles to the cross-border activity of UCITS, including the barrier to the depositary passport which is the last major bastion that stands in the way of a complete internal market for UCITS.
93

Essays in asset pricing and institutional investors

Shang, Qi January 2012 (has links)
The thesis includes three papers: 1. Limited Arbitrage Analysis of CDS Basis Trading By modeling time-varying funding costs and demand pressure as the limits to arbitrage, the paper shows that assets with identical cash-flows have not only different expected returns, but also different expected returns in excess of funding costs. I solve the model in closed-form to show that the arbitrage on the CDS and corporate bond market is a risky arbitrage. The sign of the expected excess return of the arbitrage is decided by the sign and size of market frictions rather than the observed price discrepancy. The size and risk of the arbitrage excess return are increasing in market friction levels and assets' maturities. High levels of market frictions also destruct the positive predictability of credit spread term structure on credit spread changes. Results from the empirical section support the above-mentioned model predictions. 2. General Equilibrium Analysis of Stochastic Benchmarking This paper applies a closed-form continuous-time consumption-based general equilibrium model to analyze the equilibrium implications when some agents in the economy promise to beat a stochastic benchmark at an intermediate date. For very risky benchmark, these agents increase volatility and risk premium in the equilibrium. On the other hand, when they promise to beat less risky benchmark, they decrease volatility and risk premium in the equilibrium. In both cases, the degree of effect is state-dependent and stock price rises. 3. Institutional Asset Pricing with Heterogenous Belief (Co-authored) We propose an equilibrium asset pricing model in which investors with heterogeneous beliefs care about relative performance. We find that the relative performance concern leads agents to trade more similarly, which has two effects. First, similar trading directly decreases volatility. Second, similar trading decreases the impact of the dominant agents. When the economy is extremely good or bad, the second effect is dominant so that the relative performance concern enlarges the excess volatility caused by heterogeneous beliefs. When the first effect is dominant, which corresponds to a normal economy, the volatility is lower than without the relative performance concern. Moreover, this paper shows that the relative performance concern also influences investors' holdings, stock prices and risk premia.
94

Applications of hybrid neural networks and genetic programming in financial forecasting

Stasinakis, Charalampos January 2013 (has links)
This thesis explores the utility of computational intelligent techniques and aims to contribute to the growing literature of hybrid neural networks and genetic programming applications in financial forecasting. The theoretical background and the description of the forecasting techniques are given in the first part of the thesis (chapters 1-3), while the contribution is provided through the last five self-contained chapters (chapters 4-8). Chapter 4 investigates the utility of the Psi Sigma neural network when applied to the task of forecasting and trading the Euro/Dollar exchange rate, while Kalman Filter estimation is tested in combining neural network forecasts. A time-varying leverage trading strategy based on volatility forecasts is also introduced. In chapter 5 three neural networks are used to forecast an exchange rate, while Kalman Filter, Genetic Programming and Support Vector Regression are implemented to provide stochastic and genetic forecast combinations. In addition, a hybrid leverage trading strategy tests if volatility forecasts and market shocks can be combined to boost the trading performance of the models. Chapter 6 presents a hybrid Genetic Algorithm – Support Vector Regression model for optimal parameter selection and feature subset combination. The model is applied to the task of forecasting and trading three euro exchange rates. The results of these chapters suggest that the stochastic and genetic neural network forecast combinations present superior forecasts and high profitability. In that way, more light is shed in the demanding issue of achieving statistical and trading efficiency in the foreign exchange markets. The focus of the next two chapters shifts from exchange rate forecasting to inflation and unemployment prediction through optimal macroeconomic variable selection. Chapter 7 focuses on forecasting the US inflation and unemployment, while chapter 8 presents the Rolling Genetic – Support Vector Regression model. The latter is applied to several forecasting exercises of inflation and unemployment of EMU members. Both chapters provide information on which set of macroeconomic indicators is found relevant to inflation and unemployment targeting on a monthly basis. The proposed models statistically outperform traditional ones. Hence, the voluminous literature, suggesting that non-linear time-varying approaches are more efficient and realistic in similar applications, is extended. From a technical point of view, these algorithms are superior to non-adaptive algorithms; avoid time consuming optimization approaches and efficiently cope with dimensionality and data-snooping issues.
95

Optimal stopping problems in mathematical finance

Rodosthenous, Neofytos January 2013 (has links)
This thesis is concerned with the pricing of American-type contingent claims. First, the explicit solutions to the perpetual American compound option pricing problems in the Black-Merton-Scholes model for financial markets are presented. Compound options are financial contracts which give their holders the right (but not the obligation) to buy or sell some other options at certain times in the future by the strike prices given. The method of proof is based on the reduction of the initial two-step optimal stopping problems for the underlying geometric Brownian motion to appropriate sequences of ordinary one-step problems. The latter are solved through their associated one-sided free-boundary problems and the subsequent martingale verification for ordinary differential operators. The closed form solution to the perpetual American chooser option pricing problem is also obtained, by means of the analysis of the equivalent two-sided free-boundary problem. Second, an extension of the Black-Merton-Scholes model with piecewise-constant dividend and volatility rates is considered. The optimal stopping problems related to the pricing of the perpetual American standard put and call options are solved in closed form. The method of proof is based on the reduction of the initial optimal stopping problems to the associated free-boundary problems and the subsequent martingale verification using a local time-space formula. As a result, the explicit algorithms determining the constant hitting thresholds for the underlying asset price process, which provide the optimal exercise boundaries for the options, are presented. Third, the optimal stopping games associated with perpetual convertible bonds in an extension of the Black-Merton-Scholes model with random dividends under different information flows are studied. In this type of contracts, the writers have a right to withdraw the bonds before the holders can exercise them, by converting the bonds into assets. The value functions and the stopping boundaries' expressions are derived in closed-form in the case of observable dividend rate policy, which is modelled by a continuous-time Markov chain. The analysis of the associated parabolic-type free-boundary problem, in the case of unobservable dividend rate policy, is also presented and the optimal exercise times are proved to be the first times at which the asset price process hits boundaries depending on the running state of the filtering dividend rate estimate. Moreover, the explicit estimates for the value function and the optimal exercise boundaries, in the case in which the dividend rate is observable by the writers but unobservable by the holders of the bonds, are presented. Finally, the optimal stopping problems related to the pricing of perpetual American options in an extension of the Black-Merton-Scholes model, in which the dividend and volatility rates of the underlying risky asset depend on the running values of its maximum and its maximum drawdown, are studied. The latter process represents the difference between the running maximum and the current asset value. The optimal stopping times for exercising are shown to be the first times, at which the price of the underlying asset exits some regions restricted by certain boundaries depending on the running values of the associated maximum and maximum drawdown processes. The closed-form solutions to the equivalent free-boundary problems for the value functions are obtained with smooth fit at the optimal stopping boundaries and normal reflection at the edges of the state space of the resulting three-dimensional Markov process. The optimal exercise boundaries of the perpetual American call, put and strangle options are obtained as solutions of arithmetic equations and first-order nonlinear ordinary differential equations.
96

Essays on dynamic portfolio management

Liao, Chien-Hui January 2003 (has links)
Over the last three decades, there has been an increasing interest in the problem of the investor's optimal consumption and portfolio rules. Despite the substantial amount of related literature, there remain many areas for further investigation. The thesis, therefore, addresses a number of important issues relating to the theory and practice of dynamic portfolio strategies. The thesis consists of five essays. The first two essays, Chapters 3 and 4, are concerned with efficient dynamic asset allocation programs under alternative market assumptions. Chapter 3 studies a situation where the simple time-invariant portfolio strategies are efficient and provides a complete characterisation of the strategies using the efficiency arguments. The popularised constant proportion portfolio insurance (CPPI) is embedded as a special case. Chapter 4 relaxes the assumption of a constant interest rate to allow the interest rate to follow a one factor stochastic process. The factor risk premium is then determined in a way that is consistent with the underlying equilibrium. These results are then applied to solve explicitly for an investor's optimal portfolio choice problem under the special case of a Vacisek short rate model and alternative utility functions. The third essay, Chapter 5, relaxes the assumption of a constant equity risk premium to allow the risk premium to vary through time. The evolution of the market risk premium in a representative agent equilibrium (consistent with the Black-Scholes option pricing) is investigated using a unified approach. The presence of dividends and intermediate consumption proves to be the key element that enables us to obtain a stationary economy with decreasing relative risk aversion, a theoretical result that has not be established in the existing literature. The last two essays. Chapters 6 and 7. are concerned with issues of portfolio efficiency and performance measurement. Chapter 6 uses the result from Chapter 5 that, without dividends and intermediate consumption, the market risk premium must satisfy the Burgers' equation, and applies Dybvig's payoff distribution pricing model to measure the inefficiency costs incurred when this condition is violated. The numerical results show that the degree of inefficiency is not very significant, at least for the cases which we postulate, but the findings also reassure negative result predicted from the model. Finally, Chapter 7 proposes a new utility based performance measure that can be applied in the ex-post evaluation of dynamic portfolio strategies. We construct a contingent claim estimation approach to estimate the nearest efficient strategy from a single realisation and then quantify the opportunity cost resulting from the departure of the observed strategy from the nearest efficient one. The numerical examples show that the technique is remarkably robust.
97

The agency problems in China's private equity investments : a cross-jurisdictional perspective

Zhang, Chi January 2017 (has links)
This thesis aims to identify and solve the agency problems in the life cycle of private equity (PE) investment under the commercial law system in China by comparing the legislative and adjudicative practices in the United Kingdom (UK) and other related jurisdictions. Based on transaction cost economics as the theoretical foundation of this research, the agency problems of PE investment derive from the two-level separation of ownership and control, one of which is the principal–agent relationship between the PE investors and the fund manager, and the other is the principal–agent relationship between the PE shareholders and the management of investee companies. As effective institutional solvers to agency problems, fiduciary duties as default rules have been widely developed and practised in common law countries to protect the interests of PE investors. Subject to the strong dependency on judicial practices, however, the economic function of fiduciary duties may not be fulfilled properly in the jurisdictions without a sound and independent judicial system such as that in China. Therefore, the logical purpose of this research was to find a series of feasible and costefficient approaches to reduce the agency costs in governance of three organizational structures that are involved in PE investments under Chinese legal and regulatory regimes, namely the limited partnership, business trust and corporation. As the society and economy of the UK are developed along a free-market and liberalistic ideology, the contractual freedom as the core spirit of the UK‘s commercial law has been widely accepted and recognized in both legislative and adjudicative activities. Thus, both the decision-making rules in PE funds and corporate governance of portfolio companies in the UK are also labelled as showing high respect for contractual autonomy. The protective rules sprung from common law and equity in relation to the laws of business organizations and trusts also provide flexible approaches for reducing agency costs in PE investment. Hence, this thesis especially underlines the reference to, and transplantation of, the contractual techniques of the UK‘s business organization law for enhancing investor protection of the Chinese PE industry, by which the negative impacts of political intervention and uncertainty in judicial practices may be effectively constrained. In addition, in order to make this analysis more comprehensive and objective, this thesis also refers to the institutional transplantation of trusts and corporate governance in not only continental and mixed jurisdictions, but also several typical transitional economies in the world. Based on, and beyond, the aforementioned research, this thesis argues that the basic legal framework of PE has undoubtedly been established in China. This notwithstanding, the strong state capitalistic ideology and authoritarian interest pattern still seriously impede the legal reform towards a more market-directed and investor-protection-oriented institutional construction. In a broader sense, another conclusion may also be put forward, namely that the transplantation of different business organizations across jurisdictions are determined by the distribution of the costs of protecting investors. As a brief model, the costs of investor protection are divided into internal and external approaches; the former refers to the cost of contractual arrangements within business organizations and the latter to the costs that are generated from the judicial and regulatory activities outside business organizations. Based on a detailed economic analysis of the main types of business organizations, this research concludes that 1) when the organizational and non-organizational protective approaches generate equal costs, such an organizational form should be most widely applicable and transplantable; and 2) the success of such legal transplantation depends on whether the gross costs of protecting investors can be reasonably distributed by the organizations and regulatory and judicial systems. The developing path of the commercial law system in China may preliminarily illustrate the above thesis, while more detailed studies may be developed infuture.
98

Exploring heterogeneity among socially responsible investors : a critical analysis of an ethical building society's investors in the UK

Khan, Fatima January 2016 (has links)
Socially responsible investment (SRI) has seen a massive growth in the last 10 to 15 years. Much of the literature on SRI is a result of research which has examined SR-investors as a homogeneous group of truly socially responsible investors. However, recent studies have started acknowledging the significance of two motivational criteria that an individual looks at when selecting SRI: these being financial return and social return aspects of SRI. Both these return aspects together determine an individual’s selection of socially responsible investment. Additionally, the balance an investor acquires between these two motives vary from person to person. Thus, suggesting heterogeneity among SR-investors in terms of the importance they place on the two return aspects of SRI. The aim of this study is to empirically explore heterogeneity among SR-investors in terms of the importance they place on both financial and social returns when selecting SRI. Analysis of survey data, (N=298) obtained from investors of Ecology Building Society, showed that SR-investors could be sub-grouped into three unique segments on the basis of the importance these segments hold for the financial and the social return aspects of SRI. These groups are: financial-return driven investors, social-return driven investors and dual-return driven investors. One-way ANOVA, post- hoc tests, discriminant analysis, chi2 tests and regression analysis were employed to rigorously validate this typology of investors. Pro-social attitude, perceived consumer effectiveness, trust, value orientations, age, education, income and gender were used as external variables for the validation of the typology/segments of SR investors. The three groups in the typology exhibit different psychographic and demographic profiles according to the specific combination of financial and social return that they exhibit. Also, the values motivating SRI-attitude of each cluster vary, thus highlighting the uniqueness of each cluster. These findings bring new understanding of investors in the 21st century, thus adding to the existing knowledge of investment behaviour and marketing. Marketers can benefit from the findings of this study as they can develop strategies for each segment so as to cater to their specific needs. Policy-makers striving to attain sustainability can benefit from this knowledge as they can determine which values to promote so as to sway people to invest in a sustainable way.
99

Essays on delegated portfolio management

Punz, Michael January 2017 (has links)
This thesis studies how financial market outcomes are affected by the reputational concerns of fund managers. The first chapter presents a model in which a fund manager trades in an environment with uncertain market liquidity. The fund manager trades off expected profits in the initial period and learning relating to the investment strategy in the successive period. Surprisingly, the indirect incentives do not cause the manager to focus on short-term returns to impress investors but result in a behaviour that may be described as inefficient "long termism". The model may help explain empirical puzzles such as the limits of arbitrage, the convex flow-performance relationship and the excessive trading of fund managers. The second chapter focuses on the asset pricing implications of fund flows motivated by past performance. By investing in an out-performing asset, fund managers can improve their reputations and therefore experience inflows of money into their funds. In my model, the value of a fund manager’s reputation is state dependent. In the case of an inefficient asset management market, I show that asset prices are increasing in their beta. Furthermore, the asset price depends on asset supply in my model. The third chapter analyses the size of the active management sector in a model where fund managers have reputational concerns. I show that the size of the active management sector depends on the skill of the fund managers in the sector in a non-monotone manner. The asset choices of fund managers are influenced by reputational concerns, and the information revelation of the skill of the individual fund managers depends on market outcomes. The model predicts that the amount of money invested in the active management sector may shrink sharply following rare events.
100

Insider trading around earnings announcements : implications for information dissemination in financial markets

Contreras, Harold January 2017 (has links)
The aim of this thesis is to contribute to the literature in finance and economics providing a deeper understanding about insider trading and its effects over information dissemination in the financial markets. To this end, this thesis is organized in three chapters. The first chapter tests whether insiders exploit their stock’s mispricing after earnings announcements to make profitable trades. The analysis involves estimating a model of ‘normal’ market reaction to an earnings announcement and use the deviation of the fitted value from the realized market reaction as a measure of mispricing after earnings announcements. In line with the mispricing hypothesis, the results show that insiders sell (buy) more often after large positive (negative) values of our mispricing measure and earn significant post trading returns. The second chapter extends the analysis in the first chapter by exploring more deeply the source of that mispricing. Focusing on insider sales, this chapter studies whether insiders exploit investors’ sentiment during earnings announcements to make profitable trades. In line with Miller (1977) model, the results show that insiders sell in response to market reaction of earnings announcements that are associated with an increase in divergence in investors’ opinions about their firms’ valuation and more binding short sale constraints. Finally, the third chapter studies the interaction between 2 types of informed investors, insiders and short sellers, during earnings announcements. The chapter documents that insiders and short sellers are skilled information processors who compete for trading on the news released at earnings announcements. In line with competition, stock returns are significantly more negative faster for stocks with intensive trading by both traders together than in cases where they trade intensively alone. The evidence suggests that insiders and short sellers tend to accelerate their processing skills after earnings announcements and trade faster making stock prices more efficient.

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