The purpose of this thesis is to study the relationship between industrial metals bear cycles and credit dynamics of the mining companies. This thesis is the first piece of empirical research focusing on the topic. The objective of the paper is two-fold. First, I examine the characteristics of historical metal cycles and identify the turning points in the underlying metal index series. Second, I study how the leverage ratios and cost of debt of the mining companies develop during the metal market contraction phases. My aim is to find out if the re-pricing of debt and compression of CDS spread and yield on mining companies happen before the metal prices turn, i.e. if the CDS market and the bond market act as leading indicators for metal markets. The data used in this study is gathered from two sources. First, a database of monthly metal price series is collected from the UNCTAD database for the period January 1972-May 2017. Second, in order to calculate leverage ratios for the mining companies, I download net debt, equity and EBITDA data at a yearly frequency from Bloomberg, spanning from 1992 to 2016. The start date is determined by the availability of the data series. Also, CDS spread and yield-to-maturity data is downloaded from Bloomberg. Due to relatively poor availability of data, the sample period runs from September 2002 to May 2017. My results indicate that leverage ratios of mining companies are prone to increase during periods of a metal bear market. This is likely due to fact that the continued deterioration in commodity prices during bear markets will undermine company’s cash flow. As the expansion projects take usually several years to complete, it is likely that the operating cash flow deteriorates faster than the cutbacks and capex reductions carried out by the mining companies. Second, my results also suggest that the cost of debt increases significantly for the miners during bear market phases. During the periods of continuously declining metal prices investors are likely to re-price the companies’ debt exposure. Finally, while there can be observed clear spikes both in CDS spreads and yield-to-maturities when metal bear market is approaching to its end, I do not find any evidence that the CDS spreads or the yield-to-maturities of the mining companies would reverse their trend before the metal market does. In other words, in most cases the turn in the CDS market and the bond market happen simultaneously with the metal markets.

Modeling of the stochastic discount factor using state variables to proxy for the marginal utility substituting for the failure of aggregate consumption data to account for the conditional characteristics of asset returns. The focus is on the conditional characteristics of historical stock returns specifically the trade-off between risk and return. The nonlinear least squares method inspired by the inference methodology of Britten-Jones (1999) is applied to estimate the parameters and estimate conditional volatility of the stochastic discount factor with GARCH and stochastic volatility models. The results indicate that the estimated stochastic discount factor is conditionally heteroskedastic and its conditional volatility captures the conditional variation that coincides with the phases of the business cycle significantly better than consumption-based SDF. However, the proxy for the risk-return trade-off does not capture substantial conditional variation and magnitude relative to the empirically estimated conditional Sharpe ratios that prominent literature reports. The estimated SDF accounts for predictability but cannot account for the high equity premium particularly the long-run equity premium as the conditional volatility appears to be stationary.

This thesis examines the realized equity premium and the equity risk premium puzzle in Finland during the years from 1913 to 2015. In the U.S. data, it has been noted that the attempt to connect the stock market and consumption data in the context of the consumption-based asset pricing model (CCAPM) leads to an implausibly high risk aversion parameter. The CCAPM restricts also the behavior of the risk-free rate, leading to what is termed the risk-free rate puzzle. We first present the properties of the consumption and stock market returns data, estimate the parameter values implied by the CCAPM for the Finnish data, use a dividend growth model to estimate the unconditional expected equity risk premium and finally examine the short-term predictability of dividend growth and the equity premium. We find that the joint equity premium and the risk-free rate puzzle does exist also in the Finnish data, though linking the realized average excess return to consumption data does not require a very high value for the risk aversion parameter. Because of the historically high inflation, the real risk-free rate has been very low, and correspondingly, the realized equity premium has been high in Finland. However, the high volatility of consumption growth does much to mitigate the puzzle. Also, the dividend growth estimate of the unconditional expected equity risk premium is not much less than the realized average excess return. We find evidence of short-term predictability in both dividend growth and the realized equity premium.

This thesis evaluates risk-based techniques by constructing five risk parity portfolios, Inverse Volatility, Equal Risk Contribution, Maximum Diversification, Diversified Risk Parity, and Factor Risk Parity. The empirical study focuses on the consequence after putting leverage on each strategy. Most of the risk-based portfolios are shown to be effective in improving portfolio performance over the Equally Weighted portfolio. However, monthly rebalancing and associated transaction costs can have a substantial drag on absolute returns. This thesis also uses risk measurement methodologies, Value-at-Risk(VaR), Expected Shortfall, Drawdown, Principal Component, to examine the risk characters of risk-based strategies. Most of the risk parity strategies have lower VaR, Expected Shortfall and Drawdown than our benchmark, Equally Weighted Portfolio. The reallocation of risk contribution by assets and Principal Component factors are higher for Factor Risk Parity and Diversified Risk Parity. However, this thesis finds that it is not possible to impose a positivity constraint Factor Risk Parity portfolio that matches the risk budget completely in this case. The existence of the Factor Risk Parity portfolio is not guaranteed when we have long-only constraints. The need to go short/long accelerates in times of crises, such as dot-com bubble and the financial crisis happened in 2008. Therefore, the flaw of optimal Factor Risk Parity method is that it can result in extreme weights.

Hedge funds are able to follow unconventional and dynamic trading strategies that are out of reach for traditional investment vehicles. One of these dynamic trading strategies is market neutral strategy, which aims at providing good and stable returns while simultaneously neutralizing exposure towards the market. Market neutral hedge funds are expected to perform well regardless of market conditions and this thesis focuses on analyzing, whether these funds deliver on their definition during the financial crisis of 2008. We study the performance and persistence of returns generated by market neutral hedge funds, as well as present the results of neutrality analysis during the financial crisis. The data is obtained from Lipper TASS hedge fund database and the model applied in this study is the capital asset pricing model. Results indicate that market neutral hedge funds are able to outperform the market during the financial crisis. However, they are not able to generate positive returns or statistically significant alpha. Based on the most common neutrality measures, market neutral hedge funds do not show neutrality towards the declining markets. Only a quarter of market neutral hedge funds are able to pass the mean neutrality test during the financial crisis. According to analysis in deciles, few hedge funds are able to generate positive returns during the crisis while maintaining a moderate negative exposure towards the market.

Style investing (or factor investing) is one of the most wildly discussed topics in the modern financial world. It is considered as a paradigm which provides new vision of objects and mechanisms of investing. The purpose of style investing is to capture risk premia, which are associated with some specific risks which shows up with the diversifying of systematic risks of a classical asset portfolio. In this thesis, six different style, such as Value, Size, Momentum, Quality, High dividend yield, and Volatility, were used for asset allocations. The broad academic research of factors features shows high diversification benefits from applying style instead of classical asset classes. The asset allocation approach also plays a critical role in constructing an effective portfolio. Five different risk-based allocation methods, such as the inverse volatility, the equally risk contributed, the alpha risk parity, the maximum diversification, and the diversified risk parity, are applied to construct style portfolios. The study also highlights the existence of risk-on and risk-off regimes in assets returns. The regime shifting statistical model can be used for showing the comovements over time between the portfolio returns and stages of the economic cycle or some financial policies. The first insight in the regime-switching approaches was done by Hamilton (1989). He asserted that the model is governed by an unobservable regime variable which regulates the regime switching mechanism and follows Markov process, which based on a one-step autoregression without assuming how the previous state was achieved. The results of the research supported the idea that the portfolio with regime switching mechanism outperforms the best risk-based portfolio and the benchmark. However, this result is found just for the portfolio in a long-run.

<p> Valuing high-tech startups using traditional valuation models has continued to pose valuation challenges to entrepreneurs, investors as well as financial analysts. The complications in valuing startups are heightened by the variations in valuation methodologies and the absence of operational data. Identifying the appropriate methodology for valuing startups is crucial to establishing value and a prerequisite for accessing funding through mergers or acquisitions. The purpose of this study was to examine the effect of valuation methods on the likelihood of mergers and acquisitions of high-tech startup organizations in the Nigerian capital market. The theoretical underpinning of this study is rooted in valuation theory and mergers and acquisitions theories. The extent to which valuation methods impact the likelihood of securing funds through mergers and acquisitions was the overarching research question. Random sampling was used to obtain records of valuation methods and mergers and acquisitions that occurred between 2006 and 2016 from companies in the high-tech sector. A binary logistic regression model was used to test the impact of valuation methods on the likelihood of mergers and acquisitions of high-tech startups. The impact of valuation methods on the likelihood of mergers and acquisitions was found to be not statistically significant. The participants indicated a preference for specific valuation methods during negotiations for mergers and acquisitions. The findings have implications for positive social change via a reduction in the unemployment rate by encouraging startups with their innovation and entrepreneurship. This should help to facilitate the emergence of sound valuation methods for valuing high-tech startups in the Nigerian capital market.</p><p>

<p> The inability of small and medium enterprises to access microloans from microfinance banks is a major concern in business growth and development in Nigeria. The purpose of this descriptive phenomenological study was to explore strategies for accessing microloans from microfinance banks by owners of small and medium enterprises for business growth and survival. Using the conceptual framework on social capital theory, I selected 20 small and medium enterprises owners who have accessed microloans from microfinance banks and have operated their businesses beyond 5 years with significant growth were interviewed using face-to-face semistructured interviews. Data were collected using semistructured interviews and reviews of company documents. The use of member checking strengthened the trustworthiness of the interpretation of the participants&rsquo; responses. A phenomenological approach was used for the qualitative interview with data analysis using a descriptive method. Nine themes emerged from this study: Obtaining a saving account before accessing microloans, group members serving as collateral, business social networks, business sustainability strategies, historical financial health, maintaining loan repayment deadlines, archiving business documents, use of competent guarantors, and strength and weakness analyses. The findings of the study may contribute to positive social change to create awareness among SMEs leaders in federal and state government, and individuals on how to gain access to microloans, thereby improving profitability, generating employment, reducing poverty, and enhancing standards of living among SME owners in Nigeria.</p><p>

<p> The purpose of this research project was to analyze the current state of data security practices in the financial services industry, particularly hedge funds. It investigated how firms are regulated as well as the effectiveness of the means of regulation. Finally, it recommended specific processes and procedures that hedge funds can put into practice to protect their critical information. This is an important area to research because the financial services industry makes up a large section of the global economy. Any distress this segment encounters due to security breaches could lead to systemic risk as well as the loss of confidence in capital markets. The study found that presently government regulations are not enough to protect the financial services sector and instill participant confidence. Furthermore, it determined that cyber readiness within the hedge fund industry differs by size of the fund and that smaller firms are not as far along in information security procedures as larger firms. The research concluded that although current government regulations are not proper to protect the hedge fund sector, a public/private partnership between regulators and industry groups could provide prescriptive solutions for improving data security. Finally, it concluded that individual firms need to put in place their own data security framework in order to protect the industry from large scale breaches as well as future costly governmental regulations.</p><p>

L'industrie du capital-risque constitue une composante significative au financement des projets novateurs. Comme tels, ces derniers comportent des risques qu'il est impérieux de partager avec d'autres partenaires. Le capital-risque est né de l'aversion des institutions financières traditionnelles à financer les projets au-delà d'un certain seuil de risque. Nous définissons le capital-risque comme l'apport de capital non garanti dans un esprit de partenariat. Relever les critères / indicateurs objectifs qui fondent la décision d'investir des sociétés de capital-risque (S.C.R.), tel est le but de ce mémoire. Pour ce faire nous avons mis au point un questionnaire pour valider un ensemble de critères et indicateurs susceptibles d'être pris en compte dans une évaluation financière et non financière. Ceci a été fait en collaboration avec des praticiens de l'évaluation d'entreprise et de projets d'investissement. De cette pré-enquête, il est résulté un questionnaire pertinent à l'objet de notre mémoire. Dans le but de s'assurer de l'objectivité des réponses à notre questionnaire, les critères ont été assortis d'indicateurs pertinents permettant de leur conférer une mesure. Ainsi, des instruments de mesure ont été construits à l'aide d'une échelle ordinale de cinq points; l'importance accordée à tout critère/indicateur a été mesurée. Des graphiques et des tableaux ont été construits permettant de représenter et de visualiser cette évaluation. Ces instruments comportent certes des limites mais ils rendent fidèlement compte de l'évaluation des critères/indicateurs et confèrent un cadre méthodologique adéquat à notre recherche. L'évaluation rejoint de multiples aspects de la réalité de l'entreprise et d'un projet d'affaire. Les résultats de cette recherche démontrent l'existence effective de critères/indicateurs. De plus, ils insistent, par le nombre prépondérant des indicateurs validés, sur l'objectivité des décisions d'acceptation ou de refus lors de l'évaluation des projets présentés aux organismes de capital-risque. Il apparaît aussi que ces critères/indicateurs doivent être connus des requérants de capital-risque pour leur permettre d'améliorer la présentation de leurs projets et d'éviter ainsi le gaspillage des ressources financières qu'entraînent ces rejets.