The investor sentiment hypothesis has become a promising avenue by way of a behavioural approach to complementing conventional explanations of financial market anomalies. In response to the problems exhibited in the existing theories, the investor sentiment hypothesis has been widely tested and the results of which turn out to be able to successfully explain the market anomalies to a great extent. The thesis applies the investor sentiment theory to analysing the fund anomalies in both the UK and US markets. The test results and their interpretations may help promote a better understanding of the investor sentiment and its impacts including their geographical differences. We contribute to the literature by focusing on the sentiment measures, among others. Since the investor sentiment reflects the investors’ behaviour and psychology, it is hard to be properly captured. We have constructed the proxies for the sentiment factor in both direct and indirect forms. The first fund anomaly we analysed is the “closed-end fund puzzle”. The puzzle is so-called because at IPO, the fund is issued at a premium to the net asset value (NAV); however, thispremium disappears in the next few months. The fund then trades at a discount. This discount is not fixed, varying substantially during the closure period. When the closed-end fund is either converted into an open-end fund or liquidated, the discount shrinks and the share price will rise. We construct an out-of-sample test by using the two-factor and five-factor models. The results show that the investor sentiment can contribute to explaining closed-end fund discounts in the UK market and it is more prevalent in smaller size portfolios. We also find the evidence to support investor sentiment as an important factor to represent systematic risk in the return generating process. Next, we examine the price deviations of Exchange Traded Funds (ETFs). Unlike closed end funds whose prices also deviate from the NAV, ETFs, through a mechanism known as redemption in-kind, allow institutional investors to potentially earn a profit by arbitraging away these price deviations through creating and deleting outstanding shares of the ETF. Hence, we are motivated to identify the factors that may impact on the determination of these premiums and discounts to the NAV. We first construct a sentiment proxy from the derivative market variables such as the option put–call trading volume ratio and the open interest ratio. Then we develop a sentiment proxy based on the consumer confidence index, obtained from the mainstream consumer surveys and this proxy is taken to the individual fund level. The results provide evidence that this sentiment proxy has explanatory power for most individual ETF mispricing. We take the whole industry into account and find that the sentiment factor has incremental explanatory power and is positively related to the fund premium. The evidence also shows that more sentiment-sensitive ETFs are those that have smaller, younger and volatile stocks with low dividend yields. Finally, the thesis considers the fund anomaly in the form of the REIT price momentum. In order to investigate the momentum profitability, we classify the formation period into two sentiment states, i.e. the optimistic and pessimistic periods. Evidence indicates that when sentiment is high, the REIT momentum profitability is substantial and significant; however, when the sentiment is low, the profits from the REIT momentum are much lower and not significant. We also examine the interplay between REIT liquidity and momentum profitability. We find that high REIT liquidity portfolios generate higher momentum returns, but this is only significant when the sentiment is optimistic. Furthermore, consistent with our previous findings, our evidence that momentum is generally larger for smaller companies confirms that the size effect is still available in the REIT industry. This is because the smaller companies are often difficult to value, as they are more prone to subjective evaluations. The sentiment thus could be more significant in small size companies.

This thesis aims to contribute to the existing literature about return and volatility spillovers. First, this study examines the direct transmission of information contained in returns, volatility and trading volume across the world’s eight biggest stock markets by market capitalisation using the ARCH-type models. The empirical results highlight the complexity of the information transmission mechanisms via different channels. Second, this study investigates the transmission of information in stock market index returns after considering the interactive effect between trading volume and returns. A new approach to analyse this joint-dynamic relation has been proposed and the findings are interpreted in the light of economic theory. The obtained results provide evidence that liquidity-based price movements, which are normally related to high trading volume, can also be transmitted across borders and have a global impact on market performance in other countries. Last but not least, this study explores the economic significance of international information spillovers and presents evidence showing that active investment strategies which apply trading rules based on the signals from the forecasts of the meteor shower models are profitable even after considering transaction costs. In addition, the information about the interactive relation between trading volume and returns is found to be an exploitable phenomenon which investors can use to trade profitably.

This thesis explores two celebrated asset pricing models by investigating whether or not the capital asset pricing model (CAPM) and the Fama-French three factor model apply in Emerging African Stock Markets (EASM). While Sharpe (1964) and Lintner (1965) developed the capital asset pricing model (CAPM), it has been widely tested by finance researchers and applied in practice. The central theme of the CAPM is that the only risk variable that affects asset returns is the market factor (beta). However, empirical evidence suggests that the beta alone is not sufficient to wholly explain variation in asset returns (Jensen, 1968; Jensen et al, 1972). A search for an appropriate asset pricing model has led to the development of multifactor models (Ross, 1976; Fama and French, 1992; Carhart, 1997). Fama and French (1992 and 1993) introduced the size and BE/ME anomalies to the academic literature and advocates that it might be driven by changes in microeconomic factors missed by the single factor CAPM. This study adopts Jensen (1968) version of Sharpe-Lintner CAPM and follows Jensen et al. (1972) and Fama and French (1993) time-series approaches. The study provides substantial evidence of the benefits of volatility as augmenting factor in the classic CAPM in explaining asset returns in a new application to Africa and other emerging markets with similar economic characteristics. It was demonstrated that a pricing model that includes both market risk premium and volatility risk premium significantly captures patterns of returns in Africa than the classic CAPM or Fama-French model. Furthermore, this study makes three more important contributions to the literature on. 1. That beta on its own cannot fully explain risk in Africa per CAPM’s assertion as returns can be related to other non-beta factors. 2. The evidence here produces firm contradiction to the growing literature that size and BE/ME are fundamental risk factors. These two variables are not risk factors and indeed, small and value firms do no attract additional compensation for risk in Africa. 3. Lack of integration of African stock markets with the world market means that country specific risk as measured by volatility is persistent across all five countries and therefore volatility augmented asset pricing model is more appropriate than classic CAPM or multifactor model with size and BE/ME. Unlike Fama-French and liquidity augmented models, this model is underpinned by theory. Even, in circumstances where volatility risk premium is negative as documented elsewhere and in this study for certain assets in Africa; the model provides useful information for portfolio construction/allocation and hedging in line with Merton (1973) ICAPM. emerging African capital markets as follows:

This study examines the influence of corporate governance structures on the levels of compliance with IFRSs disclosure requirements by companies listed on the stock exchanges of two leading MENA (Middle East and North Africa) countries, Egypt and Jordan. This study employs a cross-sectional analysis of a sample of non-financial companies listed on the two stock exchanges for the fiscal year 2007. Using an unweighted disclosure index, the study measures the levels of compliance by companies listed on the two stock exchanges investigated. Univariate and multivariate regression analyses are used to estimate the relationships proposed in the hypotheses. In addition, the study uses semi-structured interviews in order to supplement the interpretation of the findings of the quantitative analyses. An innovative theoretical foundation is deployed, in which compliance is interpretable through three lenses - institutional isomorphism theory, secrecy versus transparency (one of Gray’s accounting sub-cultural values), and financial economics theories. The study extends the financial reporting literature, cross-national comparative financial disclosure literature, and the emerging markets disclosure literature by carrying out one of the first comparative studies of the above mentioned stock exchanges. Results provide evidence of a lack of de facto compliance (i.e., actual compliance) with IFRSs disclosure requirements in the scrutinised MENA countries. The impact of corporate governance mechanisms for best practice on enhancing the extent of compliance with mandatory IFRSs is absent in the stock exchanges in question. The limited impact of corporate governance best practice is mainly attributed to the novelty of corporate governance in the region, a finding which lends support to the applicability of the proposed theoretical foundation to the MENA context. Finally, the study provides recommendations for improving de facto compliance with IFRSs disclosure requirements and corporate governance best practice in the MENA region and suggests areas for future research.

The published financial history of nineteenth century Scotland reveals strange discrepancies. Certain areas have been studied in considerable depth, with many articles, monographs, and general studies devoted to them. In particular, the history of Scottish banking possesses a large and worthy literature, including contributions from some of Scotland's foremost economic historians. Scottish overseas investment has also been the subject of considerable research, especially investment in the western United States. Other financial topics of no less importance have been virtually ignored. Almost nothing is known about the Scottish insurance companies despite the substantial international role that they played. More is known concerning the stock exchanges, but it is insufficient to provide more than a surface sketch. Consequently, one of the aims of this thesis is partially to rectify a major imbalance in Scottish economic history by giving a detailed description of the development of the Scottish share market up to 1900. However, the thesis attempts more: than that. The appearance of stockbrokers and the establishment of stock exchanges in Scotland was a product of the growth of joint-stock enterprise. Without the securities issued by these concerns there would have been no need for a share market. Consequently, the thesis traces the history of the joint-stock company in Scotland during the nineteenth century. Also, stock exchange securities were not the only openings to investors for their idle funds, and nor were these stocks and shares consistently popular with investors. Therefore, the thesis examines the nature of investment in general, and the factors that influenced the investor's decisions of when to invest, where to invest, and what to invest in. In order to achieve these objectives it was necessary to go beyond the study of the stock exchanges themselves and the records they possessed. The minutes, correspondence, lists and recorded transactions of the stock exchanges did provide invaluable information. However, it was only by consulting a wide range of other contemporary material, supplemented by secondary accounts, that the activities of the stock exchanges, joint-stock companies, and investors could be properly understood. Even the stock exchange records that were of great use had to be processed before their secrets were revealed. In the case of the transactions of the Aberdeen Stock Exchange, it was only by classifying the companies being traded and measuring the value of business in each category from month to month, that an accurate picture of the changing nature and value of turnover could be discovered. Without adopting this methodology it would have been impossible to study either the changes in stock exchange business or the forces affecting investment. Also it was considered important to assess the relative significance of stockbrokers and stock exchanges and understand the functions they performed. The period before either appeared was studied so as to permit an evaluation of the novelty of the contribution made by the new profession and its institutions. Contemporary economic conditions, especially current trends in investment, were investigated in order to place the activities of both stockbrokers and stock exchanges, in perspective, rather than leave them isolated from their historical context. Finally, the specific contributions of the stockbroker and the stock exchange to investment were examined as well as the contribution of the share market as a whole. In short, the aim of the thesis has been to study the evolution of a major Scottish financial institution within the economic environment in which it operated.

This thesis tests financial contagion from the US to ten African markets during the 2007-09 financial crisis. For comparative purposes, testing procedures are also extended to cover a number of developed-economy markets. There is considerable debate within the literature as to how to measure contagion. A central focus of my research is therefore to compare alternative econometric methodologies. VAR based constant-correlation based techniques are examined alongside dynamic conditional correlation (DCC) based techniques. I find that the DCC approach is superior in respect to my dataset. The 2007-09 crisis was unique from a contagion perspective in that its impact was truly global. This provided a unique opportunity to examine the subject across different continents and market types. African markets were found to have lower levels of integration (correlation) with the US than developed-economy markets and this resulted in considerable differences in the way that the contagion event spread across these two groups. As well as being truly global, the 2007-09 crisis was a contagion event that lasted more than a year. I use the volatility index (VIX) to identify both a long crisis period and a series of sub-events. The former ran from 15 September 2008 to 15 October 2009. The four sub-events were 15/09/2008-10/10/2008, 15/09/2008-17/10/2008, 15/09/2008-27/10/2008 and 15/09/2008-20/11/2008. Correlations (and contagion) changed significantly as sub-events unfolded. At the onset of the crisis, correlations with all African markets increased relatively quickly. I suggest that this can possibly be considered as being consistent with fast herding iv behaviour. The impact on developed markets was very different in that contagion spread slowly. I suggest that this can possibly be considered as being consistent with slow herding. I argue that differences in contagion found between African and developed markets reflect differences in social network effects in investor communities. I apply behavioural finance theory to more fully explore this issue and identify the channels through which contagion events developed.

My original contribution to knowledge is to evaluate the performance of adaptive trading agents for the continuous double auction (CDA) under realistic experimental conditions. Autonomous trading agents are a significant application of agent-based computational economics (ACE), the common ground between multiagent systems and economics; the CDA is arguably one of the most popular economic institutions, for the high efficiency that it offers, and for its widespread use in real world financial securities exchanges. ACE researchers proposed several trading agents for the CDA, the most prominent of which are periodically upgraded: there is an ongoing informal competition among them, to determine which strategy performs best. The creators of those agents often refer to the potential relevance of their work to real world financial markets; and yet although much interest has been given to the behavioural details of the various trading strategies, the conditions adopted for experimentation are too often far from those in place in the real world of the financial markets industry. My central question is: to what extent are those software trading agents applicable to real world financial markets? The aim of this study is to measure the performance of those software trading agents under experimental conditions that resemble those of real world markets; for that purpose, I use both pure computational agent markets, and mixed markets of human and software trading agents. To recreate the experimental environment of real world markets: I consider the rules of major stock exchanges; I draw inspiration from state-of-the-art experimental economics models; and I create a two-sided trading agent capable of improving the "quality" of the market. My main findings are that under realistic experimental conditions, the selected software trading agents form a highly efficient market, whose performance is only marginally reduced by the more stringent constraints I added; and in mixed markets, software trading agents outperform humans.

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The forward-looking nature of the options market makes it an ideal environment for investigating the determinants and the information content of investors' expectations about the future. Therefore, this thesis explores the interrelations arising between the macroeconomic and stock market environment, and the S&P 500 index options market. First, we examine how investors' sentiment driven by macroeconomic fundamentals and investors' erroneous beliefs impact the risk-neutral skewness. Our findings reveal that the macroeconomic fundamentals component of investor sentiment is the main driving force of risk neutral skewness throughout the whole sample period, while the error in investors' beliefs has limited explanatory power and only during the earlier years examined. Moreover, we show that the fundamentals component of investor sentiment affects differently the prices of call and put options. Second, we extend the concept of risk-neutral skewness by creating measures of forward skewness and gauge their predictive ability for a wide range of macroeconomic variables, asset prices, as well as systemic risk, crash risk, and uncertainty variables. Overall, we document that forward skewness encapsulates important information about future macroeconomic and financial market conditions for horizons up to one year ahead over and above forward variance. Third, we propose a novel measure of dispersion in expectations that is derived from the dispersion of options' trading volume across strike prices. We show that dispersion consistently forecasts negative excess market returns, for horizons up to two years ahead, exhibiting a predictive ability comparable to that of the variance risk premium and outperforming all other variables considered. This thesis contributes to the asset pricing and macro-finance literature by unravelling the determinants of the pricing kernel, showing that the call and put options markets are segmented and revealing that option prices and trading volume have significant forecasting ability for many aspects of the macroeconomic and financial environment. In that respect our findings are of particular interest not only to academics but also to investors and policy makers.

This thesis explores several topics related to generating yield through new strategies and asset classes. We introduce new investment strategies based on trading Futures contracts in the copper market, thus making important contributions to the literature. We expand the opportunity set of asset strategies by revisiting the concept of transaction time, shed some light on the significance of the forward curve for fundamental as well as technical traders in the commodity market and finally show how low interest rates and capital account restrictions encourage commodity-inventory related asset strategies. After an Introduction chapter, we follow in Chapter 2 upon the transaction time of Geman and Ane (1996) and the temperature of a stock as defined in Derman (2002) and extend them in two ways: the temperature is now a time-varying entity and the analysis is extended to a portfolio of stocks. We use the portfolio temperature in order to assess the cross-section of stock returns creating a long/short factor portfolio within the S&P500 IT Index based on the temperature of the stock and examine its performance on a high frequency database. We show the significance of the risk premium associated with the heat of stocks during turbulent times, focusing on a particular 3-month period in autumn 2015 that was characterized by higher equity market volatility and equity price losses. In Chapter 3, we focus our attention on the fundamental role of inventories in explaining copper price volatility. Copper price volatility has been trading in a range until 2001 but has shown signs of heat afterwards. Using a three-factor model we derive a fundamental long-term value for copper. Second, we emphasis the significance of this fundamental long-term value by considering an agent based model approach in which mean-reversion focused fundamental investors trade with chartists who follow price trends. We show that fundamental investors take increasing positions in copper when the spot price of copper deviated from its fundamental value (i.e. the fundamental value is higher than the spot price) and chartists loose relative significance. In Chapter 4, we expand on the role of inventories in the Theory of Storage and turn our attention to commodity inventory financing in China. In the aftermath of a copper financial scandal in a major Chinese port in 2014 and unprecedented queues in London Metal Exchange - related warehouses in the US acquired by financial institutions, the age-old concept of inventory is becoming elusive. The goal of this chapter is threefold: i) present the motivation and mechanism of the activity of commodity inventory financing in the specific case of copper in China as of 2009; ii) exhibit, through a database of Shanghai bonded warehouse volumes during the years 2008 to 2015, an estimate of the amount of copper involved in inventory financing. iii) Using Shanghai Exchange Futures and spot prices, we also show how interest rate arbitrage via commodity inventory financing has impacted the relationship of the copper forward curve to Shanghai copper inventories. We confirm the validity of the Theory of Storage in the case of the Shanghai copper market and show that adding bonded warehouse data to Shanghai copper inventories weakens the relationship of the forward curve to inventories.