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The thesis includes two essays on asset pricing. In the first essay, "Asset Pricing in a Monetary Economy with Heterogeneous Beliefs", we shed new light on the role of monetary policy in asset pricing by focusing on the case where investors have heterogeneous expectations about future monetary policy. Under heterogeneity in beliefs, investors place bets against each other on the evolution of money supply, and as a result, the sharing of wealth in the economy evolves stochastically over time, making money non-neutral. Employing a continuous-time, general equilibrium model, we establish these fluctuations to be rich in implications, in that they majorly affect the equilibrium prices of all assets, as well as inflation. In particular, we find that the stock market volatility may be significantly increased by the heterogeneity in beliefs, a conclusion supported by our empirical analysis. The second essay is titled with " Asset Pricing and Welfare Analysis with Bounded Rational Investors". Motivated by the fact that investors have limited ability and insufficient knowledge to process information, I model investors' bounded-rational behavior in processing information and study its implications on asset pricing. Bounded rational investors perceive "correlated" information (which consists of news that is correlated with fundamentals, but provides no information on them) as "fundamental" information. This generates "bounded rational risk". Asset prices and volatilities of asset returns are derived. Specially, the equity premium and the stock volatility are raised under some conditions. I also analyze the welfare impact of bounded rationality.

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This study analyzed the economic welfare implications of the 1990 intraregional trade liberalization scheme within the Economic Community of West African States (ECOWAS) on member country producers and consumers. Four countries were chosen as a point of focus: Burkina Faso, Cote d'Ivoire, Ghana and Mali, and two commodities: millet and sorghum. The supply and demand functions were estimated using time series data from 1970 to 1990 obtained at the level of administrative regions within each of the four countries. Optimal production, consumption, trade quantities and trade flows were determined using the REACTT model, a spatial price equilibrium solution algorithm. Two trade scenarios were simulated. The first examined trade flows under the 1990 tariff structures and the second examined trade flows under the proposed zero tariff rates. / The REACTT model results showed that removal of the tariffs would increase the crossborder trade flows between the four countries by about 12% for millet and 38% for sorghum. The welfare calculations showed that in the case of millet, all four countries would have net positive gains to the tune of $4.6 million in total. For sorghum, Burkina Faso, Ghana and Mali would have net positive gains, C ote d'Ivoire would have a net welfare loss, and the net impact on all four countries would be a positive gain of about $9.3 million. The results of the REACTT model and the welfare calculations suggest that intra-ECOWAS trade liberalization would increase total trade flows and total economic well being of the member countries.

This thesis is a theoretical analysis of optimal pricing by firms when consumer demands are uncertain. The purpose is to extend the familiar literature on single-product nonlinear pricing in two directions: to cases where the firm is regulated and to the case where the firm produces several products. Chapter 1 embeds these problems into the general setting of models of asymmetric information and, as well as covering existing work on the pricing decisions of firms facing adverse selection, discusses other areas including repeated contracts, auctions, signalling and the uses of what is known as the 'first-order approach'. Chapter 2 analyzes nonlinear pricing by a regulated single-product firm. As an alternative to requiring the firm to offer a given linear tariff two different types of regulation which allow nonlinear pricing are considered, namely, average revenue regulation and optional tariff regulation. Chapter 3 introduces the topic of multiproduct pricing when consumers have differing tastes for the various goods. The important simplifying assumption is that consumers wish to buy either one unit of a good or none at all. There are three main results: if consumers' taste parameters are continuously distributed then the firm will not offer all goods to all consumers; in the symmetric two-good case it is shown that (subject to a kind of 'hazard rate' condition) the firm will offer the bundle of two goods at a discount compared with the charge for the two goods separately; and the pricing strategy when the number of goods becomes large is solved approximately. Chapter 4 relaxes the assumption of unit demands and uses differential methods to analyze the multiproduct nonlinear pricing problem. In the symmetric case when taste parameters are continuously distributed the firm will choose to exclude some low-demand consumers from the market. It is shown that when parameters are independently distributed the firm will wish to introduce a degree of cross-dependence into its tariff. Sufficient conditions for a tariff to be optimal are derived and any tariff which satisfies these conditions necessarily will induce 'pure bundling', so that once a consumer decides to participate in the market at all she will choose to buy all goods. A class of cases is solved explicitly using these sufficient conditions. Since other solutions may be hard to solve analytically, a procedure for numerically generating solutions for the two-good case is described and two more solutions are described.

Typescript. / Thesis (Ph. D.)--University of Hawaii at Manoa, 1989. / Includes bibliographical references (leaves 149-156) / Microfiche. / x, 156 leaves, bound ill. 29 cm

Mode of access: World Wide Web. / Thesis (Ph. D.)--University of Hawaii at Manoa, 2004. / Includes bibliographical references (leaves 186-194). / Electronic reproduction. / Also available by subscription via World Wide Web / xi, 194 leaves, bound ill., 29 cm

This thesis investigates implications of interdependence between stock market prices in the context of several financial applications including: portfolio selection, tests of market efficiency and measuring the extent of integration among national stock markets. In Chapter 2, I note that volatility spillovers (transmissions of risk) have been found in numerous empirical studies but that no one, to my knowledge, has evaluated their effects in the general portfolio framework. I dynamically forecast two multivariate GARCH models, one that accounts for volatility spillovers and one that does not, and construct optimal mean-variance portfolios using these two alternative models. I show that accounting for volatility spillovers lowers portfolio risk with statistical significance and that risk-averse investors would prefer realised returns from portfolios based on the volatility spillover model. In Chapter 3, I develop a structural MGARCH model that parsimoniously specifies the conditional covariance matrix and provides an identification framework. Using the model to investigate interdependencies between size-sorted portfolios from the Australian Stock Exchange, I gain new insights into the issue of asymmetric dependence. My findings not only confirm the observation that small stocks partially adjust to market-wide news embedded in the returns to large firms but also present evidence that suggests that small firms in Australia fail to even partially adjust (with statistical significance) to large firms??? shocks contemporaneously. All adjustments in small capitalisation stocks occur with a lag. Chapter 4 uses intra-daily data and develops a new method for measuring the extent of stock market integration that takes into account non-instantaneous adjustments to overnight news. This approach establishes the amounts of time that the New York, Tokyo and London stock markets take to fully adjust to overnight news and then uses this This thesis investigates implications of interdependence between stock market prices in the context of several financial applications including: portfolio selection, tests of market efficiency and measuring the extent of integration among national stock markets. In Chapter 2, I note that volatility spillovers (transmissions of risk) have been found in numerous empirical studies but that no one, to my knowledge, has evaluated their effects in the general portfolio framework. I dynamically forecast two multivariate GARCH models, one that accounts for volatility spillovers and one that does not, and construct optimal mean-variance portfolios using these two alternative models. I show that accounting for volatility spillovers lowers portfolio risk with statistical significance and that risk-averse investors would prefer realised returns from portfolios based on the volatility spillover model. In Chapter 3, I develop a structural MGARCH model that parsimoniously specifies the conditional covariance matrix and provides an identification framework. Using the model to investigate interdependencies between size-sorted portfolios from the Australian Stock Exchange, I gain new insights into the issue of asymmetric dependence. My findings not only confirm the observation that small stocks partially adjust to market-wide news embedded in the returns to large firms but also present evidence that suggests that small firms in Australia fail to even partially adjust (with statistical significance) to large firms??? shocks contemporaneously. All adjustments in small capitalisation stocks occur with a lag. Chapter 4 uses intra-daily data and develops a new method for measuring the extent of stock market integration that takes into account non-instantaneous adjustments to overnight news. This approach establishes the amounts of time that the New York, Tokyo and London stock markets take to fully adjust to overnight news and then uses this

Ongoing globalisation has resulted in more liberalisation, integration, and competition among countries. An upshot of this has been higher levels of cross-border investment. Foreign direct investment (FDI), long considered an engine of growth, has led to widespread probe with its recent rapid spread. Nevertheless, while research on the contribution of FDI to host countries has concentrated heavily on the developed and developing economies, there has been a marked neglect of small, developed economies. This study proposes to focus on New Zealand, a country that falls within the latter category. The study seeks to verify econometrically the impact of FDI on the country through causality links with growth, trade, domestic investment and labour productivity. The analysis is based upon time-series data, the econometric techniques of single, autoregressive distributed lag (ARDL), and the multiple equations approach, vector error correction method (VECM). The study found that there have been substantial gains to the New Zealand economy. A positive effect of FDI on the variables mentioned above led to an improvement of the balance of payments through an increase in exports rather than in imports. Economic growth has mainly been achieved through FDI's impact on exports and domestic private investment. The dynamic innovation techniques indicated a bi-directional causality between FDI and the variables. The long-run causality, however, runs mainly from growth and labour productivity to FDI rather than in the opposite direction. Another noticeable feature is that New Zealand's regional agreement with Australia, Closer Economic Relations, has brought the country significant gains in terms of growth and development through FDI. Both the ARDL and VECM approaches suggest that for a small, developed country qualitative impacts are greater than quantitative ones. The policy implication is that maintaining sustainable economic growth with a positive domestic investment environment is vital for attracting foreign investors. New Zealand, while continuing to encourage inward FDI, should aim to channel it into 'innovative' tradable sectors. The challenge lies in providing the right kind of policy mix for this purpose.