Thesis (M.Sc. (Statistics)) -- University of Limpopo. 2014 / A number of previous research studies have investigated volatility and financial risks in the ermeging markets. This dissertation investigates stock returns volatility and financial risks in the Johannesburg Stock Exchange (JSE). The investigation is con- ducted in modelling volatility using Autoregressive Moving Average-Generalised Au- toregressive Conditional Heteroskedastic (ARMA-GARCH)-type models. Daily data of the log returns at the JSE over the period 08 January, 2002 to 30 December, 2011 is used. The results suggest that daily returns can be characterised by an ARMA (1, 0) process. Empirical results show that ARMA (1, 0)-GARCH (1, 1) model achieves the most accurate volatility forecast. Modelling tail behaviour of rare and extreme events is an important issue in the risk management of a financial portfolio. Extreme Value Theory (EVT) is applied to quantify upper extreme returns. Generalised Ex- treme Value (GEV) distribution is used to model the behaviour of extreme returns. Empirical results show that the Weibull distribution can be used to model stock re- turns on the JSE. In using the Generalised Pareto Distribution (GPD), the modelling framework used accommodates ARMA and GARCH models. The GPD is applied to ARMA-GARCH filtered returns series and the model is referred to as the ARMA- GARCH-GPD model. The threshold value is estimated using Pareto quantile plot while peak-over-threshold approach is used to model the upper extreme returns. In general, the ARMA-GARCH-GPD model produces more accurate estimates of ex- treme returns than the ARMA-GARCH model. The out of sample forecast indicates that the ARMA (1, 3)-GARCH (1, 1) model provides the most accurate results.

In the beef cattle industry, sustainable beef production is a primary focus, as it has direct effects on environmental stewardship, farm profitability, and public concerns. Research has been and is continually being conducted to evaluate alternative forages such as Brown Midrib Corn Silage (BMRCS) as a major component in growing beef cattle diets, to improve animal performance, ruminal fermentation, and economic returns. The objective of this study was to determine growth performance, ruminal fermentation characteristics, and economic returns of growing beef steers when fed a brown midrib corn silage-based TMR (BMRT) compared with a conventional corn silage-based TMR (CCST). This growing beef study was performed in a completely randomized design with 24 Angus crossbred steers (initial body weight (BW) = 258 ± 23.2 kg) to test 2 treatments: CCST vs. BMRT. All animals were placed in individual pens, and 12 animals allocated to each treatment (n = 12). All steers were adapted to the CCST for a 2-wk period prior to start of the trial. The CCST contained 48.1% CCS whereas the BMRT consisted of 49.0% BMRCS on a dry matter (DM) basis. All steers were fed once per day, and feed bunks assesed each afternoon and prior to morning feeding, which was used to determine the amount of feed to deliver to each pen the following day. The experiment lasted 84 d. For all steers, BW and ruminal fermentation characteristics were measured on wk 4, 8, and 12. Intake of DM averaged 9.54 kg/d across the treatments and was similar between the treatments. Steers fed the BMRT tended to increase average daily gain (ADG) compared to those fed the CCST (1.54 vs. 1.42 kg/d; P = 0.09). In addition, feeding the BMRT tended to increase G:F compared with the CCST (0.165 vs. 0.146; P = 0.07). Feeding the BMRT decreased ruminal pH (6.42 vs. 6.67; P < 0.01), whereas it increased total VFA concentration (P = 0.01) compared with the CCST. Feeding the BMRT decreased molar proportion of acetate (P < 0.01), but increased propionate proportion (P = 0.01), resulting in decreased acetate-to-propionate ratio compared with the CCST (P < 0.02). Steers fed BMRT increased feed margin (P = 0.05) and net return (P = 0.02) compared to those fed CCST throughout the trial. Overall data in this study indicate that feeding the BMRT to growing beef steers enhanced ruminal fermentation and beneficially shifted VFA profiles, which contributed to improved growth performance and economic performance of steers fed the BMRT.

This thesis involved an empirical investigation of the predictability of Australian industrial stock returns using a dynamic state-space framework. The systematic risks of industrial portfolios were examined in a stochastic market- model. The systematic risks of industry portfolios are found to be stochastic processes. Most of the industry groups have time-varying systematic risks that are mean-reverting to their stable or moving long-term mean. However, the investment and financial services, alcohol and tobacco, gold, insurance and media industry groups have rather random systematic risks. The time-varying market model provides a better explanation of the portfolio returns than the single-index model since it captures the stochastic properties of market risk. Further, a Bayesian dynamic-forecasting model was employed to examine the explanatory power of a set of economic and financial variables. The unanticipated components of the term-structure variable, the interest-rate variable and the aggregate-dividend-yield variable were shown to be significant in explaining the industry portfolio excess returns. The comparison between multivariate analysis and univariate analysis strongly indicates that the correlations within industries are critical in the investigation of the predictability of returns. In the out-of-sample analysis, a maximally predicted portfolio (MPP) was constructed based on the updated economic and financial information; however, the predictability of the MPP did not exceed that of a naive forecast. / Furthermore, the market timing ability associated with the predictability of the MPP was insignificant. The industry-group-rotation strategy is able to enhance the industry portfolio performance, but the predictability only contributes a small proportion of the profits. The results indicate that the industry returns contain predictive components; however, investors are less likely to exploit the existing predictability to gain excess profit. The level of predictability discovered here does not contradict market-efficiency theory.

In the course of 2002 and 2003, the Australian Government introduced a fundamental change to the taxation of corporate groups. The new tax consolidation legislation allows wholly-owned groups to be regarded as one homogenous entity for income tax purposes from 1st of July 2002. After making an irrevocable decision to implement the elective consolidation provisions, a group, consisting of a head company and at least one other wholly-owned entity (company, trust or partnership), lodges a single income tax return and pays a single set of PAYG instalments over the period of consolidation. The assessment of the policies, principles and rules governing the implementation and operation of the consolidation regime reveals far-reaching implications for the accessibility of tax attributes and changes to the tax cost / adjusted values of capital / depreciating assets. Tax accounting systems and corporate governance guidelines established by groups are also affected. Groups deciding against the implementation of the consolidation rules, on the other hand, face the removal of previous grouping concessions, such as loss transfer provisions, CGT asset roll-overs and inter-corporate dividend rebates. Furthermore, a number of modified anti-avoidance and integrity measures affect intra-group transactions undertaken outside the consolidation regime. This thesis identifies and analyses the areas of taxation, accounting and corporate governance which are relevant for the initial consolidation decision. The following analysis is structured with primary regard to legal concepts stipulated by the consolidation legislation. However, frequent references to policies underlying the relevant provisions, for instance the wholly-owned approach, allow a deeper understanding of the consolidation core rules and the effects arising for groups deciding to implement them. Finally, this thesis also provides a comparative perspective through the discussion of consolidation policies and rules delivered by German tax legislation, accounting regulations and corporations law.

Doctor of Philosophy / This thesis reports two tests of information-based theories of the returns to education, in the labour market for young Australians. The first is a test of whether these returns increase discontinuously with credentials such as high school graduation and university degrees. The second is a test of employer learning based upon how the returns to education, and to measures of ability not initially observed by employers, evolve with experience. These tests are conducted using a new data source which tracks individuals during the years in which they are entering and establishing themselves in the labour market, the period during which such credential and learning effects are most likely to be important. It is found that there are large and highly significant credential returns to completion of bachelor’s degrees, of 14% for males and 10% for females. For males, around 39% of the returns to 15 years of education (relative to 9 or fewer years) are attributable to credential effects, while the corresponding figure for females is 36%. These effects are stronger among workers who were recruited through hiring channels that convey less initial information to employers. There is also evidence that post-secondary admission or attendance without completion of a credential may itself have a sorting effect in the labour market. In the employer learning estimates, when parental education is used as a measure of ability observed by the researcher but not initially by employers, it is found to become increasingly correlated with wages as experience accumulates. However, no such result is found when a standardised test score is used as the ability variable – apparently because the information captured by this score is already observed by employers at the time of labour market entry. When the model is estimated separately by occupational class, the finding of employer learning holds only among white-collar workers. This may be due to the types of attributes that are reflected in parental education as a measure of initially unobserved ability.

<p>The association of exchange rates with stock returns and performance in major trading markets is widely accepted. The world’s economy has seen unprecedented growth of interdependent; as such the magnitude of the effect of exchange rates on returns will be even stronger. Since the author perceives the importance of exchange rates on stock returns, the author found it interesting to study the effect of exchange rates on some stocks traded on the Stock exchange.</p><p>There has been a renewed interest to investigate the relationship between returns and exchange rates as such; the author has chosen to investigate the present study to focus in the United Kingdom with data from the London Stock exchange .The author carried out his research on 18 companies traded on the London Stock Exchange in the process, using linear regression analysis. Taking into account the fact that the magnitude of exchange rate movements on stock returns is governed by a series of factors, the author did set up a selection criteria which spread across a series of industries ranging from financial services, manufacturing, aviation, mining, tobacco, fashion and food processing. All selected companies are of the FTSE 100 companies.</p><p>The author produced results that to some degree are consistent with predictions in the theoretical framework. The author find significant exposure of stock returns to changes in exchange rates for some companies in the sample of FTSE 100 firms used in the study. The author equally finds out that particular currencies may be of more risk to certain companies than to others by introducing euro values in to his regression equation. This gives the compelling evidence that these companies rely heavily on external sales and revenue.</p><p>The author, further employed lagged values of exchange rates in to his regression and found significant evidence of the possibility of mispricing for certain stocks and the impact of the previous days trading figures on present stock prices. The author believes that the weak responds in certain cases was as a result of hedging strategies put in place by these companies and risk management strategies which tend to minimise the effect of exchange rates movements.</p>

The first essay provides evidence on the origins of the size and value premiums by examining how order flow in the SMB and HML portfolios relates to economic conditions and investor sentiment. We find that buying pressure for SMB and HML is lower (increases) when economic conditions are expected to deteriorate (improve), while it is unrelated to proxies for investor sentiment and sales growth. These findings are consistent with big stock and value stocks being regarded as hedges against adverse shifts in economic conditions, and support a rational state variable interpretation of the size and value premiums. The second essay finds that the marketwide average of individual stock order flows and the difference between the average order flow for big stocks and the average order flow for small stocks (order flow differential) predict growth rates in real GDP, industrial production, and corporate earnings. The predictive significance of these two measures is robust to controls for return factors, suggesting a role for order flow in forecasting stock returns. Consistently, we show that an increase in the order flow differential forecasts higher returns for ten size-sorted portfolios and significantly greater market and size premiums in the subsequent quarter, even after accounting for a large host of variables. These findings are consistent with a world where aggregate order flow brings together dispersed information from heterogeneously informed investors. The third essay shows that stocks that are harder to value (stocks with less valuable growth options and more dispersed analyst forecasts) and stocks that attract less uninformed trading activity (small stocks, illiquid stocks, stocks not covered by analysts) have higher price impacts, greater probabilities of informed trading, and more private information in returns. In the time-series, reductions in trading activity and consumer sentiment increase the average price impact of trading and reduce the share of firm-specific information in returns. Recessions see high price impacts, low trading activity, and a smaller share of private signals in price movements. This reduction in private information seems to have an impact on the informativeness of prices for corporate managers: the sensitivity of corporate investment to the prices is significantly lower during recessions. / Finance

Farmers are always looking for ways to increase yields and profits and no-tillage may be a way to achieve this goal. However, a comprehensive study of the performance of no-tillage yields relative to conventional tillage yields and their net returns is lacking. This study evaluated the potential factors that influence differences in conventional tillage and no-tillage yields and net returns as explained by such factors as time, crop, precipitation, soil texture and geographic region. Data were collected from 442 paired tillage experiments growing corn, soybeans, cotton, oats, wheat and sorghum published in three refereed journals. Data were evaluated using a mixed model and logit model respectively, to evaluate differences in mean yields and downside risk with no-tillage compared to tillage. Sorghum and wheat were found to have higher no-tillage yields relative to tillage. No-tillage was also found to outperform conventional tillage in the southern United States with just the opposite occurring in the northern U.S. A silty soil was also found to reduce no-tillage yields. Several factors were found to decrease the chance of downside risk with no-tillage, they were sorghum, sandy soil, Northern Crescent, Northern Great Plains, Prairie Gateway and Southern Seaboard regions. Two factors that increased the chance of lowered no-tillage yields were increased rainfall and length of use of no-tillage. Differences in mean net returns and downside risk were evaluated using a mixed model and logit model. Results showed that no-tillage was more profitable than conventional tillage in the Mississippi Portal region, but less profitable in the Prairie Gateway. Net returns were lower for no-tillage wheat and soybeans when produced in a clay soil. Cotton grown in sand had higher no-till net returns, but increased rainfall decreased cotton net returns. A logit model showed certain factors decreased the probability of lower no-tillage net returns. There was less downside risk with wheat grown under no-tillage as well as less downside risk in the Southern Seaboard region and when no-tillage was used on a clay soil. There were factors that increased the probability of lower no-tillage net returns; increased precipitation, Northern Great Plains, Prairie Gateway and Basin & Range regions.

The association of exchange rates with stock returns and performance in major trading markets is widely accepted. The world’s economy has seen unprecedented growth of interdependent; as such the magnitude of the effect of exchange rates on returns will be even stronger. Since the author perceives the importance of exchange rates on stock returns, the author found it interesting to study the effect of exchange rates on some stocks traded on the Stock exchange. There has been a renewed interest to investigate the relationship between returns and exchange rates as such; the author has chosen to investigate the present study to focus in the United Kingdom with data from the London Stock exchange .The author carried out his research on 18 companies traded on the London Stock Exchange in the process, using linear regression analysis. Taking into account the fact that the magnitude of exchange rate movements on stock returns is governed by a series of factors, the author did set up a selection criteria which spread across a series of industries ranging from financial services, manufacturing, aviation, mining, tobacco, fashion and food processing. All selected companies are of the FTSE 100 companies. The author produced results that to some degree are consistent with predictions in the theoretical framework. The author find significant exposure of stock returns to changes in exchange rates for some companies in the sample of FTSE 100 firms used in the study. The author equally finds out that particular currencies may be of more risk to certain companies than to others by introducing euro values in to his regression equation. This gives the compelling evidence that these companies rely heavily on external sales and revenue. The author, further employed lagged values of exchange rates in to his regression and found significant evidence of the possibility of mispricing for certain stocks and the impact of the previous days trading figures on present stock prices. The author believes that the weak responds in certain cases was as a result of hedging strategies put in place by these companies and risk management strategies which tend to minimise the effect of exchange rates movements.

This thesis studies the momentum trading strategies, in which investors buy stocks that performed well in the past and sell stocks that underperformed over the same peiord of time. We examine the momentum strategies from January of 1995 to September of 2006. This thesis has two purposes. First, do the momentum trading strategies generate positive abnormal returns ? Second, do the momentum trading strategies generate positive abnormal returns even after we consider the limits of short-selling stocks ? The results indicate that the momentum trading strategies generate significant positive returns. Furthermore, the momentum trading strategies still offer positive abnormal returns even after the limits of short-selling shares are taken into account, although the magnitude of positive abnormal returns decreases.