There has been an increasing interest in the finance literature regarding the impact of transactions costs on US equity markets. The US empirical evidence indicates that transactions costs influence both trading volume (Atkins and Dyl (1997)) and asset returns (Amihud and Mendelson (1986)). Additionally, the theoretical finance literature also indicates that transactions costs affect equilibrium asset returns (Fisher (1994)). In this thesis we assess the impact of transactions costs on the UK equity markets, from four aspects. Firstly, we provide empirical support to the hypothesis that transactions costs affect the "holding period" of an asset in the portfolio of an investor. Secondly, we provide robust results showing that transactions costs affect equilibrium asset returns. Thirdly, we explain the variability of transactions costs with the use of information asymmetry, proxied by the variance of analysts' forecasts, in the spirit of Kim and Verrecchia (1994, 2001). Finally, we find that stock price and trading volume reaction to changes in the FTSE 100 list can be explained by liquidity effects, as proxied by the bid-ask spread. We provide overwhelming evidence, suggesting that transactions costs are important in UK equity markets.

The 2007–2009 financial crisis led to a decrease in consumer and investor confidence worldwide (SARB, 2008:2). Along with the weakened business sentiment and consumer demand, tightened funding conditions in financial markets, increased inflationary pressures, and declining global manufacturing activities, the world economic recession that followed the collapse of the world financial sector led to an estimated wealth destruction of approximately US$50 trillion (SARB, 2008:2; Aisen & Franken, 2010:3; Karunanayake et al., 2010). Apart from this estimate, the International Monetary Fund (IMF) also projected that the global bank balance sheets in advanced countries suffered losses of approximately US$4 trillion during the period 2009–2010 (Aisen & Franken, 2010:3). As a result, investors have become more risk-adverse (Guiso et al., 2013:1), and the consequences of the financial crisis, made insurable profitable investment decisions extremely difficult as market volatility tends to increase during crises periods (Karunanayake et al., 2010; Schwert, 1989:83). With the financial environment in distress, some fund managers consider equities as the preferred asset class to protect the purchasing power of their clients (Ivan, 2013). However, the studies of Ennis and Sebastian (2003) and Nicholas (2004) found evidence that hedge funds will outperform equity markets during a downswing in financial markets. In addition, hedge funds are considered market-neutral due to these investment funds’ unrestricted investment flexibility and more efficient market timing abilities (Ennis & Sebastian, 2003). Hedge funds are also considered to be more unconventional assets for improving portfolio diversification (Lamm, 1999:87), where the variation of investment strategies available in a hedge fund has the ability to satisfy investors with several different risk preferences (Shin, 2012). Still, a number of previous studies have debated conflicting evidence regarding the performance of hedge funds and the persistence in outperforming other markets. This led to the objective of this study; to evaluate the risk-adjusted performance of US and EU hedge funds compared to the associated world equity markets over the 2007–2009 financial crisis. The evidence from this study confirmed the dominance of hedge funds over the CAC 40, DAX, S&P 500 and Dow Jones, from 2004 to 2011, emphasising that the performance of the US and EU hedge funds would overshadow a normal buy-and-hold strategy on the world equity markets under investigation. Overall, the Sharpe-, Sortino-, Jensen’s alpha-, Treynor- and Calmar ratios illustrated that US hedge funds outperformed both EU hedge funds and the associated equity markets over this period. The presence of non-normality among the return distributions led to the use of the Omega ratio as the proper benchmark, which also confirmed the outperformance of US hedge funds over EU hedge funds and associated world equity markets. / MCom (Risk Management), North-West University, Vaal Triangle Campus, 2014

The 2007–2009 financial crisis led to a decrease in consumer and investor confidence worldwide (SARB, 2008:2). Along with the weakened business sentiment and consumer demand, tightened funding conditions in financial markets, increased inflationary pressures, and declining global manufacturing activities, the world economic recession that followed the collapse of the world financial sector led to an estimated wealth destruction of approximately US$50 trillion (SARB, 2008:2; Aisen & Franken, 2010:3; Karunanayake et al., 2010). Apart from this estimate, the International Monetary Fund (IMF) also projected that the global bank balance sheets in advanced countries suffered losses of approximately US$4 trillion during the period 2009–2010 (Aisen & Franken, 2010:3). As a result, investors have become more risk-adverse (Guiso et al., 2013:1), and the consequences of the financial crisis, made insurable profitable investment decisions extremely difficult as market volatility tends to increase during crises periods (Karunanayake et al., 2010; Schwert, 1989:83). With the financial environment in distress, some fund managers consider equities as the preferred asset class to protect the purchasing power of their clients (Ivan, 2013). However, the studies of Ennis and Sebastian (2003) and Nicholas (2004) found evidence that hedge funds will outperform equity markets during a downswing in financial markets. In addition, hedge funds are considered market-neutral due to these investment funds’ unrestricted investment flexibility and more efficient market timing abilities (Ennis & Sebastian, 2003). Hedge funds are also considered to be more unconventional assets for improving portfolio diversification (Lamm, 1999:87), where the variation of investment strategies available in a hedge fund has the ability to satisfy investors with several different risk preferences (Shin, 2012). Still, a number of previous studies have debated conflicting evidence regarding the performance of hedge funds and the persistence in outperforming other markets. This led to the objective of this study; to evaluate the risk-adjusted performance of US and EU hedge funds compared to the associated world equity markets over the 2007–2009 financial crisis. The evidence from this study confirmed the dominance of hedge funds over the CAC 40, DAX, S&P 500 and Dow Jones, from 2004 to 2011, emphasising that the performance of the US and EU hedge funds would overshadow a normal buy-and-hold strategy on the world equity markets under investigation. Overall, the Sharpe-, Sortino-, Jensen’s alpha-, Treynor- and Calmar ratios illustrated that US hedge funds outperformed both EU hedge funds and the associated equity markets over this period. The presence of non-normality among the return distributions led to the use of the Omega ratio as the proper benchmark, which also confirmed the outperformance of US hedge funds over EU hedge funds and associated world equity markets. / MCom (Risk Management), North-West University, Vaal Triangle Campus, 2014

This thesis examines the efficacy of markets, using both quantitative and qualitative methods in a complementary way. Specifically, it starts (in Part II) by using the results from a quantitative analysis of initial public offering (IPO) underpricing as a barometer for corporate governance failure. This quantitative work identified Russia, China and India as extreme outliers. The data set used for this work was the cross-section sample of 45 countries developed by Loughran, Ritter & Rydqvist (2008). More broadly (in Part III), the thesis takes the lead of the quantitative evidence to examine, in a qualitative framework, possible sources of corporate governance failure in China, India and Russia. This was done categorically, under the headings of Globalisation, Corporate Governance, Institutional Structure and Competitive Strategy. Data were gathered by eldwork in China, India and Russia, and these findings were then benchmarked against findings from further fieldwork in the United Kingdom. This created a unique 56,000 word database, which was used for both cross-site and within-site analysis. This indicates how both unique attributes (e.g. rule of law, transparency, regulation, etc.), and common attributes (e.g. transition from a socialist/Marxist regime, market immaturity, asymmetric information etc.), combine to explain the different morphologies of corporate governance in these three countries. The quantitative analysis (Part II) consists of exploratory data analysis (EDA) and econometric work. The exploratory data analysis establishes, through graphical means and regression techniques, a negative correlation between IPO underpricing and globalisation (as measured by the KOF index, see Dreher, 2006). Building on this, the subsequent econometric modelling suggests that economic, demographic and institutional factors are all significant determinants of IPO underpricing. The qualitative analysis carried out in Part III of the thesis, builds on and extends the quantitative analysis of Part II. This is consistent with the multiple method approach, which combines both quantitative and qualitative analysis to achieve a synthesis of findings. The qualitative analysis uses evidence from semi-structured interviews with finance professionals and opinion makers, as well as evidence from additional primary and secondary sources, which was also made available through fieldwork contacts. This analysis emphasises the especial importance of board composition, information flows, the judicial system, the stock exchanges, and financial regulators for forms of corporate governance.

Darbe analizuojamos palyginamųjų daugiklių metodo taikymo galimybės Baltijos šalių listinguojamoms įmonėms. Darbo tikslas - įvertinti palyginamųjų daugiklių metodo taikymo galimybes nelikvidžiose rinkose Baltijos šalių listinguojamų įmonių pavyzdžiu. Darbą sudaro trys dalys, kurių pirmojoje pristatomi daugiklių metodo privalumai, trūkumai, praktinio pritaikymo etapai ir skirtingų metodų, naudojamų kiekviename praktinio pritaikymo etape, poveikio vertinimo rezultatams apžvalga. Antroje dalyje pateikiama ir pagrindžiama tyrimo metodologija, o trečioje - tyrimo rezultatai. Pagrindiniai tyrimo rezultatai rodo, kad palyginamųjų daugiklių metodas nelikvidžiose rinkose listinguojamų įmonių atveju duoda didesnes paklaidas nei įmonių, listinguojamų likvidesnėse kapitalo rinkose, atveju. Visgi, EV/IC, EV/NOA, EV/TA, EV/EBITDA, EV/EBIT ir P/B daugikliai gali būti taikomi vertinant Baltijos šalių listinguojamas įmones. Be to, nustatyta, kad 1) įmonės vertės daugikliai duoda mažesnes paklaidas nei nuosavybės vertės daugikliai; 2) su balansinėmis vetėmis susieti daugikliai duoda mažesnes paklaidas, nei su pelnu, pardavimais ar pinigų srautais susieti daugikliai; 3)tinkamiausias įmonių atrankos kriterijus yra ROIC; 4) daugiklių kombinavimas nėra prasmingas, kadangi padidina vertinimo tikslumą tik nežymiai ir tik kai kurių daugiklių atveju; 5) skirtingiems pramonės sektoriams egzistuoja skirtingi tinkamiausi daugikliai. / This paper analyzes the application possibilities of multiples valuation method in the Baltic states equity market. The aim of this paper is to assess the application possibilities of multiples valuation method in illiquid markets, with the example of Baltic listed companies. The work consists of three parts. The first part presents the advantages and disadvantages of the multiples method, also it presents method‘s practical applications stages and and the review of results of the previous research on this topic. The second part describes the research methodology. The third part presents the results of empyrical study. The main findings of this study is: 1) valuation erros, when multiples valuation method is applied in illiquid markets are higher, then those in liquid markets; 2) however, the EV / IC, EV / NOA, EV / TA, EV / EBITDA, EV / EBIT and P / B multiples are appropriate for valuation of companies listed in Baltic stock exchange; 3) entity value multiples outperform equity value multiples 4) book value multiples outperform accrual flow and cash flow multiples 3) the most appropriate criteria for selecting comperable companies is ROIC; 4) The combination of multiples is not meaningful as it increases the accuracy of valuation only slightly, and only for some of the multiples 5) different industries are associated with different best multiples.

Submitted by Vicente Ferreira (vicentemferreira@yahoo.com.br) on 2014-12-10T17:16:54Z No. of bitstreams: 1 Vicente Ferreira - CORPORATE GOVERNANCE AND ITS INFLUENCE ON THE INVESTMENT DECISION PROCESS.pdf: 3167398 bytes, checksum: 7af870f5333f6b04ec9bfbadad2fd104 (MD5) / Approved for entry into archive by Janete de Oliveira Feitosa (janete.feitosa@fgv.br) on 2015-01-19T15:19:01Z (GMT) No. of bitstreams: 1 Vicente Ferreira - CORPORATE GOVERNANCE AND ITS INFLUENCE ON THE INVESTMENT DECISION PROCESS.pdf: 3167398 bytes, checksum: 7af870f5333f6b04ec9bfbadad2fd104 (MD5) / Approved for entry into archive by Marcia Bacha (marcia.bacha@fgv.br) on 2015-01-30T13:39:04Z (GMT) No. of bitstreams: 1 Vicente Ferreira - CORPORATE GOVERNANCE AND ITS INFLUENCE ON THE INVESTMENT DECISION PROCESS.pdf: 3167398 bytes, checksum: 7af870f5333f6b04ec9bfbadad2fd104 (MD5) / Made available in DSpace on 2015-01-30T13:39:26Z (GMT). No. of bitstreams: 1 Vicente Ferreira - CORPORATE GOVERNANCE AND ITS INFLUENCE ON THE INVESTMENT DECISION PROCESS.pdf: 3167398 bytes, checksum: 7af870f5333f6b04ec9bfbadad2fd104 (MD5) Previous issue date: 2014-10-31 / Corporate governance has been in the spotlight for the past two decades, being subject of numerous researches all over the world. Governance is pictured as a broad and diverse theme, evolving through different routes to form distinct systems. This scenario together with 2 types of agency problems (investor vs. management and minorities vs. controlling shareholders) produce different definitions for governance. Usually, studies investigate whether corporate governance structures influence firm performance, and company valuation. This approach implies investors can identify those impacts and later take them into consideration when making investment decisions. However, behavioral finance theory shows that not always investors take rational decisions, and therefore the modus operandi of those professionals needs to be understood. So, this research aimed to investigate to what extent Brazilian corporate governance standards and practices influence the investment decision-making process of equity markets' professionals from the sell-side and buy-side. This exploratory study was carried out through qualitative and quantitative approaches. In the qualitative phase, 8 practitioners were interviewed and 3 dimensions emerged: understanding, pertinence and practice. Based on the interviews’ findings, a questionnaire was formulated and distributed to buy-siders and sell-siders that cover Brazilian stocks. 117 respondents from all over the world contributed to the study. The data obtained were analyzed through structural equation modeling and descriptive statistics. The 3 dimensions became 5 constructs: definition (institutionalized governance, informal governance), pertinence (relevance), practice (valuation process, structured governance assessment) The results of this thesis suggest there is no definitive answer, as the extent to which governance will influence an investment decision process will depend on a number of circumstances which compose the context. The only certainty is the need to present a 'corporate governance behavior', rather than simply establishing rules and regulations at firm and country level.

Measurement of volatility spillovers and asymmetric connectedness on commodity and equity markets Tereza Malířová Master's Thesis, IES FSV UK, July 2017 We study volatility spillovers among commodity and equity markets by employing a recently developed approach based on realized measures and forecast error variance decomposition invariant to the variable ordering from vector-autoregressions. This enables us to measure total, directional and net volatility spillovers as well as the asymmetry of responses to positive and negative shocks. We exploit high-frequency data on the prices of Crude oil, Corn, Cotton and Gold futures, and the S&P 500 Index and use a sample which spans from January 2002 to December 2015 to cover the entire period around the global financial crisis of 2008. Our empirical analysis reveals that on average, the volatility shocks related to other markets account for around one fifth of the volatility forecast error variance. We find that shocks to the stock markets play the most important role as the S&P 500 Index dominates all commodities in terms of general volatility spillover transmission. Our results further suggest that volatility spillovers across the analyzed assets were rather limited before the global financial crisis, which then boosted the connectedness between commodity and stock...

The dissertation consists of two essays. The first essay investigates how oil market factors impact on liquidity commonality in global equity markets. I identify two transmitting channels of the effect on liquidity commonality, namely oil price return and volatility. Using a sample of firms drawn from 50 countries spanning from Jan 1995 to Dec 2015, I find that both effects in oil explain the liquidity commonality in countries with higher integration to oil market. In addition, I show that oil volatility effect is more pronounced in net oil exporters compared to net oil importers after controlling for oil sensitivity. My findings suggest that oil volatility effect on liquidity commonality is more substantial for high oil sensitive countries than oil price return effect except five OPEC members, where liquidity commonality is highly influenced by oil the return along with volatility. These results are robust to controlling for possible sources of liquidity commonality as found in the literature. In the second essay, I study the impact of stock liquidity on firms’ future investments. Since stock liquidity decreases the cost of equity, I expect firms’ future investments to increase with stock liquidity. Secondly, I argue that this relation is more pronounced in more financially constrained firms because of their limited access to external capital. Using a sample of more than 9800 firms, from 21 emerging markets and spanning from 2000 to 2015, I find supportive and robust evidence of a positive association between stock liquidity and firms’ future investments. Furthermore, my findings strongly suggest that the liquidity impact on corporate investments is highly influenced by the firms’ financial constraint levels, using four different definitions of financial constraints. My findings are robust due to controlling for other determinants of future investment suggested in the previous literature, and due to controlling for the country and time effects. In addition, the results seem to be consistent with the use of alternative measures of corporate investments and stock liquidity and with alternative model specifications and estimation methodologies.

In this thesis, I exploit accounting issues in the Chinese context with a particular focus on the role of government. The thesis consists of three empirical essays, examining how the state coordinates among the state-owned enterprises in executive compensation (essay 1), how the government regulates the dividend payouts of listed firms (essay 2) and how the delisting regulation influences the accounting choices of listed firms (essay 3).The first essay examines relative performance evaluation (RPE) in China. Previous studies of RPE for executive compensations in Western developed markets have produced mixed findings. This is partly because the dispersion of share ownership in Western capital markets does not closely correspond with the single-principal/multi-agent theoretical setting assumed by Holmstrom (1982). In this study, I exploit the existence of a large number of state-owned enterprises (SOEs) in China to examine RPE in a setting closer to the theoretical assumption. I find that SOEs are more likely to use RPE for executive compensation than non-SOEs. This is consistent with better cross-firm coordination in executive contracting among SOEs under a common “state” principal than among non-SOEs with dispersed principals similar to Western firms. Furthermore, I find a more pronounced RPE effect among SOEs that are larger or have poorer past performance. This implies that the state principal has greater incentives to monitor strategically important firms or those in distress. The second essay examines the market reaction to and earnings management choices around changes in the regulations requiring a higher minimum dividend payout in China to shed new light on the determinants of dividend payout policy. I find that the market reaction is more positive for firms that paid less than the new required minimum payout than for those that paid more than the new required minimum, consistent with agency cost explanations of dividend payout. In addition, I find that low dividend payers exhibit a greater tendency to manage their earnings downwards to comply with the earnings-based threshold, and investors can “see through” such earnings management behaviors. My findings support the view of DeAngelo, DeAngelo and Skinner (2009) that agency costs of free cash flow retention are an important part of the dividend payout story. The third essay explores the earnings-based delisting rule in China that provides particularly strong motivation to manage earnings above the loss/profit threshold. I identify two groups of firms that successfully avoid being ST-ed, i.e. firms with a one-year loss before returning to profit, and firms with consecutive small profits. I provide a comprehensive examination of earnings management in terms of accruals management, real earnings management and non-operating income, to investigate whether Chinese firms manage earnings either to avoid reporting a loss or to avoid reporting two consecutive losses. Though there are mixed results sensitive to the research design for earnings management pattern in the two groups of firms, this study provides insights into earnings management induced by a government regulation.

Volatility-managed portfolios offer mixed returns in an international setting based on ex-ante information. The results of this paper further strengthen the theory that the variability of excess returns from volatility-management are more dependent on underlying investor strategy rather than differences of global markets. We find that momentum strategies, as measured by the winners-minus-losers, are universally (except Japan) benefitted from volatility-management with an excess return between 6.96% and 14.28% annually across different regions/cross-sections garnered by the managed portfolio controlled against the Fama and French (2015) five-factor model. Value and profitability factors show mixed results with the beneficial performance in about half of the examined regions respectively. We prove that these relationships are robust through periods of market-wide crashes (Dotcom-bubble and financial crises of 2007/2008), tighter leverage constraints (≤1, ≤1.5) show however that the excess returns are dampened, concluding that access to leverage is a fundamental aspect of employing volatility-management to most portfolios. The results of this research paper expand previous literature of volatility-management by broadening the strategy to global markets.