Thesis submitted in fulfilment of the requirements for the degree of Masters of Management in Finance and Investments in the Faculty of Commerce, Law and Management Wits Business School at the University of the Witwatersrand , 2016 / We use a comprehensive HedgeNews Africa data set from January 2007 to October 2016 to examine the performance of South African Hedge Funds in relation to JSE All share Index and All Bond Composite Index. We do so using Capital Assets Pricing Model (CAPM), Fama and French three-factor model and four factor model. Research on South African hedge funds are scarce, which motivate this research and in the light of the new regulation that provide for two categories of hedge funds, namely Qualified Investor hedge funds and Retail Investors hedge funds, to see how ordinary investor can benefit from this unique industry. The results show that South African hedge fund have low correlation with the All Bond Composite Index, but do not outperform the JSE All Share Index. We also find that South African hedge fund outperforms the All Bond Composite Index. We further test whether South African hedge fund managers have market timing ability and find that they do not have any significant market timing ability. / MT2017

Thesis (M.Com. (Finance))--University of the Witwatersrand, Faculty of Commerce, Law and Management, School of Economic and Business Sciences, 2016 / The purpose of the study is to investigate the effects of relaxing the assumption of multivariate normality typically utilised within the traditional asset pricing framework. This is achieved in two ways. The first involves the introduction of higher moments into the linear Capital Asset Pricing Model while the second involves a Monte Carlo experiment to determine the impact of skewness and kurtosis on test statistics traditionally employed to assess the validity of asset pricing models. We commence by establishing non-normality for the majority of sample portfolios. A cross-sectional regression approach is employed to estimate factor risk premia and test higher moment Capital Asset Pricing Models. Unconditional coskewness and unconditional cokurtosis are found to be priced within the market equity (size) sorted and book equity/market equity (value) sorted portfolio sets over the period January 1993 to December 2013. Conditional coskewness and conditional cokurtosis are found to be priced for only the size sorted portfolios over the period January 1997 to December 2013. Factor risk premia estimated for coskewness are generally positive while risk premia estimated for cokurtosis are negative. This suggests a positive relationship between coskewness and expected return and a negative relationship between cokurtosis and expected return. The results of the asset pricing model tests are mixed. The pricing errors for higher moment Capital Asset Pricing Models are shown to be significantly different from zero for size sorted portfolios while pricing errors on the value sorted, dual size-value sorted and industry portfolios are found to be statistically insignificant. This suggest that none of the asset pricing models tested are the true model as it would explain variation in expected returns regardless of the data generating process. Finally we show that the Ordinary Least Square Wald test statistic has the most desirable size characteristics while the Generalised Least Squares J-test statistic has the most desirable power characteristics when dealing with non-normal data.

Thesis submitted in fulfilment of the requirements for the Masters in Finance and Investments in the Faculty of Commerce, Law and Management Wits Business School At the University of Witwatersrand / The study focuses on determining the driving factors of the performance of different hedge fund strategies in the South African industry. This is done through the application of an augmented capital asset pricing model. The model is predicated on the original (Sharpe, 1964) and (Lintner, 1965) Capital Asset Pricing Model. The researcher uses the excess market returns and the South African Volatility index as independent variables in the explanation of hedge fund returns at strategy and portfolio level. Through the analysis, the researcher finds that the excess market returns and the South African Volatility Index characterize the hedge fund expected returns for some of the strategies using OLS and GMM techniques. The second section uses a system of seemingly unrelated regressions for both the OLS and GMM techniques to determine if the two explanatory variables are priced into the different strategies; this indeed is shown to be the case for some of the strategies examined in the analysis. / MT2017

Thesis. 1980. Ph.D.--Massachusetts Institute of Technology. Dept. of Economics. / MICROFICHE COPY AVAILABLE IN ARCHIVES AND DEWEY. / Bibliography : leaves 182-186. / Ph.D.

Thesis (M.S.)--Massachusetts Institute of Technology, Alfred P. Sloan School of Management, 1981. / MICROFICHE COPY AVAILABLE IN ARCHIVES AND DEWEY. / Bibliography: leaves 336-339. / by Josephine S. Jimenez. / M.S.

The first essay examines the joint determination of the contract for a private equity (PE) fund manager and the equilibrium risk premium of the PE fund. My model relies on two realistic features of PE funds. First, I model agency frictions between PE fund's investors and manager. Second, I model the illiquidity of PE fund investments. To alleviate agency frictions, compensation to the manager becomes sensitive to the PE fund performance, which makes investors excessively hold the PE fund to hedge the manager's fees. This induces a negative effect on the risk premium in equilibrium. For the second feature, I add search frictions in the secondary market for PE fund's shares. PE fund returns also contain a positive illiquidity premium since investors internalize the possibility of holding sub-optimal positions in the PE fund. Thus, my model delivers a plausible explanation for the inconclusive findings of the empirical literature regarding PE funds' performance. Agency conflicts deliver a lower risk-adjusted performance of PE funds, while illiquidity risk can raise it. In the second essay, coauthored with Andrew Ang and Pierre Collin-Dufresne, we investigate how often investors should adjust asset class allocation targets when returns are predictable and updating allocation targets is costly. We compute optimal tactical asset allocation (TAA) policies over equities and bonds. By varying how often the weights are reset, we estimate the utility costs of different frequencies of TAA decisions relative to the continuous optimal Merton (1971) policy. We find that the utility cost of infrequent switching is minimized when the investor updates the target portfolio weights annually. Tactical tilts taking advantage of predictable stock returns generate approximately twice as much value as those market-timing bond returns. In the third essay, also coauthored with Andrew Ang and Pierre Collin-Dufresne, we revisit the question of a pension sponsor's optimal asset allocation in the presence of a downside constraint and the possibility for the pension sponsor to contribute money to the pension plan. We analyze the joint problem of optimal investing and contribution decisions, when there is disutility associated with contributions. Interestingly, we find that the optimal portfolio decision often looks like a ``risky gambling" strategy where the pension sponsor increases the pension plan's allocation to risky assets in bad states. This is very different from the traditional prediction, where in economy downturns the pension sponsor should fully switch to the risk-free portfolio. Our solution method involves a separation of the pension sponsor's problem into a utility maximization problem and a disutility minimization one.

This thesis studies the equilibrium behavior of continuous-time capital markets with various market assumptions. These assumptions include different settings of the investment opportunity set and consideration of the variability of the number of shares outstanding of stocks and the investment horizons of investors. Two capital asset pricing models (CAPMs) are established for every case. One of these CAPM focuses on the study of the relationship between the terminal rate of return of any given portfolio and the benchmark portfolios. The other CAPM focuses on the instantaneous rate of return. The market portfolios (and their substitutes for some cases) of all market situations are explicitly derived given homogeneous expectations. The mean-variance efficiencies with a specific terminal time are then investigated. It is proved that some of these market portfolios must be inefficient for a non-zero investment horizon. Moreover, the instantaneous efficiency of portfolios is studied for some market situations. The CAPMs are then developed based on the conditions of each market situation. / Chiu Chun Hung. / "December 2003." / Adviser: Xun Yu Zhou. / Source: Dissertation Abstracts International, Volume: 64-11, Section: A, page: 4147. / Thesis (Ph.D.)--Chinese University of Hong Kong, 2003. / Includes bibliographical references (p. 185-187). / Electronic reproduction. Hong Kong : Chinese University of Hong Kong, [2012] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Electronic reproduction. Ann Arbor, MI : ProQuest dissertations and theses, [200-] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Electronic reproduction. Ann Arbor, MI : ProQuest Information and Learning Company, [200-] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Abstracts in English and Chinese. / School code: 1307.

Fu, Hoi Man. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2009. / Includes bibliographical references (leaves 31-34). / Abstract also in Chinese.

Abstract not available

Research in this thesis deals with some unexplored, or only partially explored, issues relating to the information content of volatility of the idiosyncratic component of asset returns at the firm and industry-level, both in the context of developed and emerging stock markets. Specific issues we have investigated include potential role of idiosyncratic volatility of equity returns for the explanation of future stock market volatility, aggregate economic activity, cross-border information transmission, and fundamental efficiency of stock prices. Chapter 2 of the thesis presents research into the information content of firm and industry-level idiosyncratic volatility, estimated as cross-sectional volatility (CSV), for future market-level volatility in Australia. We find that CSV does contain information beyond what is already contained in the lagged market-level return shocks and has a significant positive relationship with conditional market volatility. Our analysis gives new empirical evidence that the effect of CSV is stronger in relatively stable market conditions than in more volatile market conditions. We also examine how the information content of stock turnover and aggregate company announcements compares with that of CSV, and take a novel data-driven approach to verify whether CSV captures any information about multiple common factor shocks in asset returns. The explanatory power of CSV for future market volatility remains robust even after controlling for the effects of stock turnover, company announcements and omitted factor shocks in returns. These results are in line with the theoretical models relating volatility to the flow of information to the market, and suggest that the amount of information as captured by the firm and industry-level CSV shares a common co-movement with the market-wide information flow. In Chapter 3, unlike most other studies investigating the role of macroeconomic aggregates in explaining the fluctuations in stock market returns, we consider the possibility of reverse causality, and that using idiosyncratic volatility of industry-level stock returns in the context of Australia. Both the theories of investment and consumption under uncertainty and the models of sectoral reallocation provide rationale for the analysis. By explicitly modeling the cyclical patterns of industry-level volatility and relating it to corresponding cyclical behaviour of macroeconomic variables, we show that industry-level volatility is a leading indicator of the cyclical movements in output growth and inflation in Australia. We find complementary evidence from the multi-step Granger causality test and the impulse response analysis based on a vector autoregression of industry-level volatility, GDP growth, inflation and changes in unemployment rate. However, the forecast error variance decompositions suggest that although the industry-level volatility accounts for a significant fraction of the forecast error of inflation, this explains only a small fraction of output and unemployment uncertainties. Further analysis indicates that industry-level volatility contains better information about the future state of the economy than does aggregate stock market volatility. In Chapter 4, we explore a new but potentially important channel of crossborder information transmission between international stock markets ���� idiosyncratic volatility of stock returns. Specifically, we analyze the role of US and Japanese idiosyncratic volatility in transmitting information across three smaller but advanced Asia-Pacific stock markets – Australia, Hong Kong and Singapore. We find that, similar to cross-market first and second moment return correlations, market-wide measures of IV are also highly correlated across countries. The effect of US and Japanese IV information is found to be much stronger on cross-market conditional volatility process than on the returns process. Further, we find significant contemporaneous and dynamic information transmission from IV of the US and Japan to the trading volume of other stock markets. Transmission of IV information, in general, seems to have gained momentum in the period since the Asian crisis of 1997. Overall evidence presented in this chapter is consistent with the interpretation that IV may contain information about some unobservable factors driving international stock market co-movement. In Chapter 5, we make the first attempt to understand the direct relationship between firm-specific variations in returns and firm fundamentals by analyzing firmlevel micro panel data in the context of each of a set of emerging Asian stock markets. After properly accounting for unobserved firm-specific effects, volatility persistence and potential endogeneity bias, we find that firm-specific variation of stock returns is highly correlated with, and is significantly explained by, alternative proxies of firm-specific variation of fundamentals in a majority of the emerging markets in Asia. Further analysis reveals that the observed effect of firm-specific fundamentals variation on returns variation is not indirectly driven by some other factors known to affect stock return volatility, viz., firm size, stock turnover, and leverage. Consistent with the rational approach, these results suggest that stock prices in majority of the Asian emerging markets are not devoid of fundamentals. / Doctor of Philosophy (PhD)