My thesis explores issues concerned with delegated asset management and their implications for asset prices. The first chapter of my thesis documents how the organizational form of a mutual fund affects its investment strategies. I show that decentralized funds allocate a greater portion of their capital to soft (opaque) information companies than centralized funds. Consistent with the inability of centralized organizations to handle soft information, I find that decentralized funds are better at investing in soft information companies than hierarchical funds. Furthermore, I find that high levels of ownership by decentralized funds predict high future returns for soft information companies. The second chapter shows that while fund families may use mutual fund incubation (the creation and management of a fund before it is offered to the public) in an opportunistic fashion, they also seem to use it to foster innovation. I document that fund families tend to launch their incubated funds when their past performance is high, consistent with a behaviour that aims to exploit the convex relationship between past performance and current flows. However, I also show that, after their Initial Public Offerings (IPO's), incubated funds tend to hold more illiquid stocks, hold more concentrated portfolios, invest in less-popular securities and are better at purchasing stocks than non-incubated funds. This difference in investment strategies is due to the incubation period as it allows managers to explore different corners of the market without having to take into account performanc-induced capital flows. I also present evidence that, despite their outstanding pre-IPO track records, incubated funds attract a smaller share of new-fund capital flows than non-incubated funds. The third chapter (joint work with Dr. Mungo Wilson) shows that mutual fund families cater to investors' demand by offering funds with investment styles that are in vogue. I also show that this catering exacerbates the ''dumb money" effect. In other words, fund IPOs have a positive effect on the persistence of investment style capital flows.

The concentration of studies of capital investment on an aggregative approach at the national level has led to an inadequate explanation of the procedures by which capital investment took place. This thesis seeks to achieve a fuller understanding of the process by examining the whole matrix of capital investment in a particular region - north Somerset - for a limited but important period - the early years of industrialization, 1750-1830. The review of the historical context of this region includes a study of the gentry, attorneys, bankers, and merchants, whose interaction is analysed through a broad range of cases drawn from agriculture, mining, manufacture, and transport. The costs involved in the creation of fixed assets and their distribution, the relationship between fixed and circulating capital, and the returns to investment are all subjected to close analysis. The conclusions are, first, that there was a clear distinction between land- or resource-based ventures (enclosures, drainage schemes, mining, transport), financed from within the region, large in structure and with a slowly built up capital input, and the capital- or trade-based enclaves (manufacturing), smaller in scale and dependant upon a network of capital and credit facilities from outside the region, chiefly from Bristol. Secondly, the study shows the importance of legal authorizations (enclosure Acts, partnership agreements), in defining the sources of capital and their outlets. Thirdly, the operation of an impersonal capital market is revealed, based on institutional mortgages (turnpike trusts, improvement commissions). And finally it is shown that both professional (legal, banking, surveying, engineering) and entrepreneurial skills (manufacturers, coal masters, merchants) played a vital part in the supply and employment of capital. The conjunction of this wide range of factors is demonstrated for the first time to be of crucial importance in the process of capital investment in north Somerset.

In 1974, Merton wrote a seminal paper that explained how the then recently presented Black-Scholes model could be applied to the pricing of corporate debt. Many extensions of this model followed. The family of models is sometimes referred to as the family of structural models of corporate bond prices. It has found applications in bond pricing and risk management, but appears to have a more mixed empirical record than the so-called reduced-form models (e.g. Duffie and Singleton 1999), and is often considered imprecise. As a consequence, it is often avoided in pricing and hedging applications. This thesis examines three possible avenues for improving the performance of structural models: 1. Strategic interaction between debtors: Possible "Coordination failures" - races to recover value that can dismember firms - are a very important form of strategic interaction between debtors that can have a large influence on the value of debt. 2. The econometrics of structural models: The classic "calibration" methodology widely employed in the literature is an ad-hoc procedure that has severe problems from an econometric perspective. This thesis proposes a filtering-based approach instead that is demonstrably superior. 3. The non-default component of spreads: Corporate bond prices most probably do not only represent credit risk, but also other types of risk (e.g. liquidity risk). This thesis attempts to quantify and assess this non-default component.

The relationship between stock returns and non-beta variables has attracted a considerable amount 0 f attention in the US stock market. Existing empirical work suggests that the cross-section of stock market returns can best be explained by the size of a firm and its book-to-market ratio. In explaining the time-series behaviour of stock market returns. size. the book-to-market ratio and a market factor seem to be significant explanatory variables. There is little theoretical justification to support the role of size and book-to-market as determinants of expected stock market returns. Pope and Stark (2000) model the firm as a portfolio of real (production and investment) options and then observe that size and book-to-market capture characteristics of the determinants of the expected returns on such real options. Within these models. size and book-to-market emerge as natural determinants of expected returns because of this feature. This thesis applies the intuition of Pope and Stark (2000) to a study of stock return variability in the UK for the period 1990 to 1996. Using a sample of all listed non financial companies, the analysis examines the relationship between monthly stock returns and the earnings-to-price ratio (E/P), size (ME), book-to-market ratio (BE/ME)market and book leverage (A/ME, A/BE), dividend yield (D/P), cash flow from operations-to-price (CFO/P), research and development-to-price (RD/ME), capacity utilisation (sales-to-total assets (S/A)) and three measures of risk (conventional market beta, unsystematic risk and total risk). Research and development is used for two reasons. First it is anticipated that research and development purchases real investment options and, second, research and development is expensed in the UK, and hence dropped from the book value of equity even though it appears to buy intangible assets. As a result, one explanation of the book-to-market effect is that it, at least in part. captures the impact of intangible assets purchased by expenditure on research and development activities. Using portfolio techniques and Fama and MacBeth (1973) cross-section regression models. the findings reveal in particular, a significant relationship between BE/ML CFO/P and RD/ME and expected returns. Time-series regression results show that the three-factor model of Fama and French (1993) explains returns on a wide range of portfolios but that a fourth factor capturing the effect of RD enhances this three-factor model. Other factors can also play a part in addition to the three factors of Fama and French (1993).

The Asian REIT industry has evolved significantly since its introduction in Japan in 2001. Asian REITs have provided investors with various benefits including high dividend yields, stable returns, portfolio diversification, improved liquidity, higher transparency and greater access to pan-Asian and global real estate markets. However, their benefits and future development may be clouded by potential agency problems that may arise from their externally managed organisational structure, business-relationships with sponsors and regulatory provisions. This thesis aims to investigate whether Asian REITs suffer from agency problems and examine the role of corporate governance in mitigating these problems. The impacts of corporate governance on Asian REIT performance and valuation are also analysed in this thesis. The analyses of this thesis are based on the four largest REIT markets in Asia, namely Japan, Singapore, Hong Kong and Malaysia. The results show that REITs with stronger corporate governance and investor protection are associated with higher firm valuation and better perfonnance. This thesis also provides evidence that some Asian REITs suffer from overinvestment. Nevertheless, the degree of over investment is reduced when REITs have strong corporate governance mechanisms in place. The findings further reveal that business-relationships with sponsors do not lead to expropriation of minority unit holders' wealth when investor protection is weak. Moreover, an increase in sponsor ownership does not incentivise sponsors to entrench themselves. In fact, sponsors are able to provide REITs with a wide range of support when they have equity stakes in the REIT. Overall, this thesis highlights the significance of corporate governance in mitigating the agency problems and improving Asian REIT performance and valuation.

The "Fundamental Indexation for Mexican Stocks" chapter applies the Fundamental Indexation methodology, as proposed by Arnot, Hsu and Moore (2005), to the Mexican market. This style of portfolio construction implies the use of financial metrics, rather than stock prices, to create investment strategies. The main findings are that most of the fundamental indexes used outperform the market-cap portfolio, in terms of average returns, terminal value and the relationship between risk and return. In ) particular, the Cash Flow and Cash & Investment strategies outperform the market-cap in terms of returns and Sharpe ratio, while the RNOI delivers the lowest levels of risk. The "Excess Comovement of Commodity Prices: Incorporating a Speculation Variable" chapter follows Pindyck and Rotemberg's (1990) methodology to test for the presence of excess comovement on commodity prices, but incorporates speculation as an additional explanatory factor in the model. Following the reports by the CFTC, Open Interest (01), Net Open Interest (NOI) and Total Net Open Interest (TNOI) are used as measures of speculation and it is found that these variables help to explain the behaviour of the commodity prices, but they do not remove all the excess comovement. The "Cross-Sectional and Time-Series Momentum in Commodity Futures Markets" chapter focuses on the methodologies developed by Jegadeesh and Titman (1993, 2001) for Cross-Sectional momentum, and Moskowitz, Ooi and Pedersen (2012) for Time-Series momentum. Both momentum strategies produce better results in comparison with market (equity, bond, and commodity) and risk (5MB, HML, and UMD) factors during the period 2000-2011 than during the period 1985-1999. Using cumulative and relative variance, the time-series momentum outperforms the classical cross-section strategy, in terms of returns and reward-to-risk ratio. Finally, using the time-series approach, the Metal sector achieves the highest returns and the Agricultural sector experiences the lowest volatility.

This thesis consists of three substantial chapters on topics related to bubbles in financial markets, an Introduction and Conclusion. A sharp increase in Chinese house prices combined with the extraordinary lending growth during the 2000s has led to concerns of an emerging real estate bubble. The first essay studies (nominal and real) house prices relative to fundamental house values. Housing constitutes a large fraction of most household portfolios and its characteristics are in contrast to what prevails in most financial markets as arbitrage is limited and hence correction toward fundamental values can be a prolonged process. Using a time-varying present value approach, our findings suggest evidence of bubbles in the Chinese housing market nationally and in representative cities using both nominal and real data. We also find that price dynamics have an important role to play in determining house prices. Moreover, the results reveal that the dominant driving force of house price deviations from fundamental values might be the less than fully rational behaviour of investors rather than fundamental factors. This seems plausible in an emerging market such as China.

This thesis details the development of a portable parallel financial derivative pricing tool. The software tool developed allows the specification of a wide range of financial derivatives, within the bounds of a general model developed from a general mathematical formula for stochastic asset paths of financial derivatives. The tool allows the user to input a derivative formula using a mathematical notation, and efficient OpenCL code will be automatically generated to price the specified derivative, using optimisations appropriate for the hardware architecture.

This thesis examines option pricing under stochastic volatility for S&P 500 and FTSE 100 index options. The main contributions of the thesis are: (i) it provides empirical evidence of stochastic volatility in S&P 500 and FTSE 100 index returns; (ii) it explains empirically the impact of stochastic volatility on option pricing for index options; (iii) it tests whether option prices are consistent with the time series properties of the underlying asset price; and (iv) it investigates the magnitude and sign of volatility risk premlums. The empirical evidence shows that changes in S&P 500 and FTSE 100 index prices have distributions with fatter tails than the normal distribution and non-zero skewness. This leads to a consideration of non-normal distributions and possible explanations for deviations from normality. Of the possible explanations for the documented leptokurtosis in stock returns, stochastic volatility is generally regarded as the most likely candidate. The GARCH( 1,1 LTX model is shown to capture the volatile nature of our data well. A diffusion limit of the GARCH(1, 1 L TX process is the mean-reverting square root volatility process used in Heston's (1993) option pricing formula. This research considers Heston's (1993) stochastic volatility (SV) option pricing model as the empirical challenger to the Black-Scholes (BS) model, which assumes that the distribution of stock price changes is normally distributed with constant volatility. Insample pricing, out-of-sample forecasting, diagnosis of implied volatility curves, and internal consistency with the time series of implied volatilities and with the GARCH( 1,1 L TX process are examined to investigate the performance of the BS and SV models. We also conduct careful and detailed data screening for our empirical work. Our results reveal significant evidence of stochastic volatility implicit in option prices, and suggest that this phenomenon is essential to improving the performance of the BS model for index options. Nevertheless, internal consistency test results report inconsistency of both the BS and SV models with time-series data, indicating residual SV model misspecification for SPX and FTSE-I00 options. This has the important implication that stochastic volatility is a significant factor in option pricing but not the only factor affecting stock index option prices. Option pricing under stochastic volatility involves a preference issue since volatility is a nontraded asset. This research assumes that the volatility risk premium is proportional to the spot volatility level, which is internalised in the risk-neutral parameters. The actual volatility parameters can be recovered either from the time series of implied volatilities using option prices or from the GARCH( 1,1 L TX process using index returns. By comparing actual parameters with their risk-neutral counterparts, an estimate of the unit volatility risk premium can be thus obtained. Negative premiums for volatility risk are consistently observed in the SPX option market while there are mixed results for the S&P 500 index, FTSE 100 index and options markets. Nevertheless, the magnitudes of these estimates indicate that compensation for volatility risk is a significant component of the risk premiums in the S&P 500 and FTSE 100 index and option markets. However, the possibility of misspecification in the SV and GARCH(I,ILTX models should be kept in mind when explaining the magnitude and sign of risk premiums.

This research explores several issues and problems associated with the perception of corporate property assets held by stock market investors. Our primary aim is to examine whether the market views property as an important corporate asset from the perspectives of valuation and strategy. For most non-property companies, property has been treated and managed merely as a factor of production with little judgement about how it is expensed or valued - often it is carried in the balance sheet for a fraction of its current market value. Further, its role in the corporate financial statements has not been understood. Given that property is a sizable asset in the balance sheets of some non-property companies, and that there are possibly two (distinct) markets at work - one for property and one for corporate equities, our concern is whether property is valued by the stock market on a different basis from its market value and whether the book value of property in company accounts differs sufficiently from either valuation to allow profitable intervention, through change in control, revaluation, acquisition and disposal or refinancing. From the strategy viewpoint, the existence of a strategy for the property market can help "property-intensive" companies arbitrage the difference between property asset value and share price. This is operationalised through various types of incremental property investment/divestiture which alter the property asset intensity of the companies. Our investigation is mainly concerned with detecting any significant abnormal return consequences in respect of revisions in property asset intensity through acquisitions, disposals and revaluations and their financial implications. 13 Our evidence appears to suggest that property asset intensity is an important factor in corporate financial management. In particular, it can significantly affect the corporate financial structure and risk-return perfonnance of "property-intensive" companies. Since its importance has not been fully reflected in current share price through property valuation, there are opportunities for retailers and other "property-intensive" companies to earn higher positive abnonnal returns and raise the stock market's valuation of their properties through incremental transactions in the property market. We further discover that the decisions of retailers to acquire/dispose of properties and their choice of valuation base for property can be partially influenced by the prevailing financial conditions of the companies. This further suggests that the intensity value of property has a role to play in corporate financial strategy. Finally, our strategic property valuation framework fonnalises the arbitrage relationship between property asset values and company share prices in the context of core business and explores profitable strategies for retailers to pursue in the property market. We do not pretend to answer all the questions raised. Within the sphere of Corporate real estate management, the methods and evidence reported in this research can be the basis for further study in the empirical literature related to the synthesis of property and fmancial asset" valuation and management in the UK corporate environment.