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Emerging markets have become important investment destination for international investors as they seek opportunities to grow and diversify their investment portfolios. At the same time, emerging markets are perceived to be riskier than developed markets. It is therefore imperative for the international investor to fully comprehend and appreciate the risk faced by their investments in the emerging markets and the drivers of the underlying their value. A significant amount of research has been carried out on the valuation of companies in emerging markets and the role country risk has in determining the final valuation price. Despite this, there is still no consensus amongst practitioners in the financial industry and academics on the best approach. The valuation methodologies currently employed vary significantly and in some cases involve making arbitrary adjustments based on “gut feel” with limited empirical evidence. This research study appraises existing emerging markets valuation frameworks such as the discounted cash flow model (DCF), including capital asset pricing model (CAPM) and its variants. It also looks at relative valuation and real option pricing framework with intention of proposing the “best practice” valuation framework for valuing companies in emerging markets. The general theory is that emerging markets are segmented from the developed world capital markets making portfolio optimisation across these markets difficult. Segmentation of emerging markets is as a result of inefficiency of the capital markets, in particular the inability of foreign investors to enter and exit the local capital markets at no extra costs. The emerging markets valuation frameworks are designed to address the inability to effectively diversify investments due to the segmentation of these markets. It was therefore pertinent that this study determines whether emerging markets are indeed segmented from world capital markets and therefore significantly riskier than developed markets. This part of the study was carried out by conducting both quantitative and qualitative analysis of the emerging capital markets. Quantitative analysis was done on the performances of twenty-seven emerging equity markets for the period between July 1998 and November 2008 and the results were compared with the US equity market analysis (United States was used in the study as the proxy for the world equity market) for the same period. The study used volatility of the markets as the measure of risk and the correlation to measure the level of integration. Qualitative analysis involved reviewing regulatory, legal and political risks of the different emerging markets. The results from this part of the study showed that emerging markets are indeed riskier than developed markets and are somewhat segmented from the world capital markets. Based on 4 this result, we concluded that the valuation frameworks in emerging markets should be adjusted or modified to incorporate the impact of country risk. A total of eleven different emerging markets valuation frameworks were appraised. The study reviewed the literature relating to the emerging markets valuation frameworks to establish their theoretical and empirical basis. The study also conducted qualitative and quantitative analysis of each of the eleven selected methods regarding relevance and practicality in the valuation of emerging market companies. Valuation models were developed from the different valuation frameworks, a process that included deriving different variants of the models such as the country risk premium. The qualitative analysis looked at the how practical is the valuation frameworks considering its variants. For quantitative analysis the emerging market valuation models were used to value ABSA Bank Group; Edgars Consolidated Stores Limited; and Standard Bank Group and outcomes of the valuation were compared with the final purchase price paid in recent corporate transactions involving these companies. The absolute difference between the notional valuation and the actual transaction price was used to rank the valuation frameworks, with smallest difference indicating the best fit. All the eleven emerging market valuation methodologies yielded results different from the purchase prices. Erb−Harvey−Viskanta (EHV) model had the best fit when compared with the actual purchase price. However, the study does not propose the usage of EHV as the “best practice” method because of weak theoretical basis. The study concludes that at least three to four methodologies should be used to derive a valuation range for purchase price negotiations

Além da capacidade de negociar, a atuação conjunta de agentes autônomos para resolver problemas complexos requer objetivos ao menos parcialmente compartilhados, de modo a tornar a cooperação atraente para tais agentes. Por outro lado, agentes competindo entre si podem trazer benefícios sociais, à medida que os mais aptos forem identificados e recursos sejam canalizados para aumentar sua relevância social e deste modo contribuir mais fortemente para a eficiência de todo o grupo. Dentro deste conceito, este trabalho apresenta uma arquitetura multiagentes que busca através da competição entre agentes com interesses comuns obter maior ganho social. Esta arquitetura, nomeada COAST, foi desenhada para o complexo ambiente que é a administração automatizada de ativos. Um sistema COAST é capaz de administrar uma carteira de ativos, utilizando um modelo explícito de perfil de investidor também proposto neste trabalho. Busca-se não apenas a maximização dos retornos, mas também um efetivo controle de risco e retorno, seguindo as restrições dadas pelo perfil do investidor. Um sistema de simulação de mercado financeiro, denominado AgEx, foi criado para facilitar o trabalho de desenvolver agentes para a administração de ativos e simular sua atuação através do uso de dados reais de negociações ocorridas em mercados financeiros. Foram realizadas várias simulações onde se pode observar que a arquitetura COAST se mostrou bastante eficaz no domínio escolhido / In order to solve complex problems using several autonomous agents it is necessary that these agents present negotiation skills and share some common goals to make cooperation attractive. On the other hand, competition among agents may bring some social benefits, since the most effective agents can be identified and more resources could be associated to them, thus contributing better to the whole society. According to this idea, this work presents a multiagent architecture that tries to explore competition among agents with commons goals, as a way to achieve better social results. The architecture was named COAST and it was designed to manage assets in an autonomous way. COAST is able to manage assets using an explicit investor profile model that is also proposed in this work. COAST architecture tries not only to maximize profits but also an effective risk and return control, according to an investor profile. A financial market simulation tool, called AgEx, was also implemented. This tool may facilitate the development of agents to automated asset management and simulate their acting in stock markets was also developed. We have performed many simulated experiments to validate COAST and the obtained results show that the use of COAST architecture in this domain is quite effective.

Além da capacidade de negociar, a atuação conjunta de agentes autônomos para resolver problemas complexos requer objetivos ao menos parcialmente compartilhados, de modo a tornar a cooperação atraente para tais agentes. Por outro lado, agentes competindo entre si podem trazer benefícios sociais, à medida que os mais aptos forem identificados e recursos sejam canalizados para aumentar sua relevância social e deste modo contribuir mais fortemente para a eficiência de todo o grupo. Dentro deste conceito, este trabalho apresenta uma arquitetura multiagentes que busca através da competição entre agentes com interesses comuns obter maior ganho social. Esta arquitetura, nomeada COAST, foi desenhada para o complexo ambiente que é a administração automatizada de ativos. Um sistema COAST é capaz de administrar uma carteira de ativos, utilizando um modelo explícito de perfil de investidor também proposto neste trabalho. Busca-se não apenas a maximização dos retornos, mas também um efetivo controle de risco e retorno, seguindo as restrições dadas pelo perfil do investidor. Um sistema de simulação de mercado financeiro, denominado AgEx, foi criado para facilitar o trabalho de desenvolver agentes para a administração de ativos e simular sua atuação através do uso de dados reais de negociações ocorridas em mercados financeiros. Foram realizadas várias simulações onde se pode observar que a arquitetura COAST se mostrou bastante eficaz no domínio escolhido / In order to solve complex problems using several autonomous agents it is necessary that these agents present negotiation skills and share some common goals to make cooperation attractive. On the other hand, competition among agents may bring some social benefits, since the most effective agents can be identified and more resources could be associated to them, thus contributing better to the whole society. According to this idea, this work presents a multiagent architecture that tries to explore competition among agents with commons goals, as a way to achieve better social results. The architecture was named COAST and it was designed to manage assets in an autonomous way. COAST is able to manage assets using an explicit investor profile model that is also proposed in this work. COAST architecture tries not only to maximize profits but also an effective risk and return control, according to an investor profile. A financial market simulation tool, called AgEx, was also implemented. This tool may facilitate the development of agents to automated asset management and simulate their acting in stock markets was also developed. We have performed many simulated experiments to validate COAST and the obtained results show that the use of COAST architecture in this domain is quite effective.

This paper explores the relation between the governmental expenditures on the cultural sector and the performance of the economy in the UK. In welfare economies it is the government’s role to shorten the effects of the occurring market failures. It is shown that in the cultural sector, two market failures, the high fix cost and the productivity lag are appearing. In order to ease these effects the government intervening into the market mechanisms by giving grants and subsidies to the stakeholders. In the empirical part a time series analysis is executed between the GDP, the total governmental expenditures and the governmental expenditures on the cultural services on a 60 years interval in the UK. It is shown that the three variables have the same order of integration, they move together over time, furthermore cointegration was detected between them. With Granger causality test it was proven that there is a bidirectional informal connection between the performance of economy and the government’s cultural expenditures.

Magister Commercii - MCom / The drastic decline in stock prices on the 24th October 1929 sent a frantic wave of panic across the US. Merely a century later, on the 29th September 2008 another financial crisis hit the globe - this time leaving most countries devastated. The main objective of this study is twofold: 1) to determine whether leading indicators have sufficient predictive capacity to predict global financial crises; and 2) to use the Efficient Market Theory (EMT) and/ or Behavioural Finance Theory (BFT) as a means of developing a theory explaining the potential impact bad public announcements had on the level of investor confidence before the 1929 Great Depression and the 2008 Global Financial Crisis. This study was not only designed to qualitatively conceptualise the notion of the term “investor confidence” whilst drawing special attention to its frailty using the 1929 Great Depression and the 2008 Global Financial Crisis, but also assist governments, reserve banks and key institutions to develop effective strategies of mitigating the effects of the latter financial crisis as well as provide guidance on how another financial crisis can be prevented. This study extracted bad public announcements from 40 books and 60 journal articles using 6 NBER-based leading economic indicators (LEI) and 4 systematic risk-based leading non-economic indicators (LNEI) in order to: 1) qualitatively assess the extent to which leading indicators can be used to predict global financial crises 3 – 8 months in advance; and 2) use the EMT and/ or BFT to provide an explanation concerning the potential impact that bad public announcements had on the level of investor confidence before the 1929 Great Depression and the 2008 Global Financial Crisis.

Background: Acquiring capital is a crucial component for developing countries to strengthen their economies and gathering it solely through national channels is challenging. Public-private partnerships allows for foreign capital to fund projects aimed at developing infrastructure through private investors. Yet, the topic of how to attract investors to public-private partnerships is largely unexplored.   Purpose: The purpose of this study is to investigate how investors with different levels of experience perceive attributes of public-private partnerships in developing countries. Furthermore, to add to the current body of knowledge of the topic, as it is limited to investors with extensive experience. Thus, we investigate investors with a range of previous knowledge and their observed preferences regarding investment opportunities.  Method: This bachelor thesis is written in accordance with a positivist approach where quantitative data was extracted through a questionnaire from 31 individuals with different investments experience. The results are later analysed in terms of mean value, standard deviation, multivariate multiple regression analysis and p-value approach. The data is later discussed in terms of relevance, connection to literature and in context to the frame of reference.    Conclusion: The results gathered in this thesis showcased that 3 out of 14 factors indicated a statistical significance. Which refers to that the level of investor experience influence how the individual investor perceives adequate local expertise, political support and acceptance of PPPs and capabilities of the developing country. This on the other hand also represents the overall homogenous perception and assumption regarding various factors of PPPs in developing countries from an experienced and inexperienced investors perspective. Moreover, this study provides additional knowledge and literature background regarding how investor experience influence perception on various factors associated with PPP markets in developing countries.

This study employs a quantitative approach to investigate the momentum phenomenon in the commodity futures market. The study captures the phenomenon using two momentum indicators, namely, MACD and RSI, and extends the scope of indicator utilization to both joint and single usage. The research aims to explore whether portfolios consisting of these indicators can generate abnormal returns in the commodity futures market, in comparison to the S&P GSCI, which was used as the benchmark index. The study uses accumulated data from 2010 to 2019, with portfolios constructed on a quarterly basis. Statistical significance determination is executed by exporting the data to Stata, where the normality distribution is ascertained using the Shapiro-Wilk test. This was later followed by t-tests in order to dictate statistical significance on each portfolio compared to the S&P GSCI. The study reveals empirical evidence to support two of the three strategies, namely, the joint use of the aforementioned momentum indicators and single use of the RSI momentum indicator. However, the accumulated yield of the portfolio provided insufficient results to conclude the statistical significance of the single use of the MACD momentum indicator. The authors derive these results and observed phenomena from several financial theories, which are divided into three main sections in the theoretical framework, including information-based, risk-based, and behavior-based explanations. Relevant theories are included to support the research at hand. Furthermore, the authors incorporate the Efficient Market Hypothesis (EMH) under the pretense of challenging its view on efficient markets. They do so by constructing portfolios which yield abnormal returns and subsequently question the notion of efficient markets. The authors deduct that their findings produce some evidence to support the absence of strong form and semi-strong form of market efficiency in the commodity futures market. Overall, this study provides valuable insights into the momentum phenomenon in the commodity futures market and different incorporating investment techniques in which they are utilized. The ways in which momentum strategies can be utilized and momentum indicators interpreted, as displayed in this thesis, presents practical implications for investors and financial professionals.

This study examines the divide between finance theory and practice by analysing the significance of the determinants of capital structure choice among 123 listed firms on the JSE, to determine whether these firms follow the trade-off theory or the pecking-order theory. Data obtained from McGregor’s Bureau of Financial Analysis database was analysed using standard multiple regressions, stepwise regressions and ANOVA techniques to test for financing behaviour. The results indicated that the trade-off model has both cross-sectional and time-series explanatory power for explaining the financing behaviour, while tests on the pecking-order model were weak. The results further revealed a significant positive correlation between debt financing and financial distress, and a significant negative correlation between debt financing and the collateral value of assets during the period under study (1995-2005). These findings suggest a divergence between finance theory and practice for JSE listed firms and manifest conflicting ideologies between finance practices of developed and developing economies. / Business management / M. Com. (Business Management )

Recent research suggests that financial system development is important for economic development and for reducing financing constraints of firms (Levine, 2005). Consequently, researchers started investigating the factors that determine financial system development. A group of factors that have been identified are institutional factors. Many researchers have investigated the theoretical and empirical links among historical institutional factors, current institutional factors, and financial system development (Beck and Levine, 2005). There are, however, few studies that have investigated extensively the theoretical and empirical links among institutional factors and financial system development within the African context. Africa provides an interesting context to empirically validate and refine many of the theories that have been postulated to explain the relationships among historical and current institutional factors and financial system development. This is because Africa is in the process of developing its institutions and reforming existing ones and offers an opportunity to examine the impact of institutional factors on financial system development in nascent contexts. Therefore, this dissertation investigated the following research question: To what extent are institutional factors determinants of financial system development in Africa? To answer this research question, this study empirically evaluated the effects on financial system development of historical institutional factors that have been identified by four theories: legal origins theory, disease endowment theory, religion-based theory, and ethnic fractionalisation theory. Moreover, current institutional factors identified by the law and finance theory as possible determinants of financial system development were empirically examined. Furthermore, the links among historical and current institutional factors were empirically studied. The results show that the disease endowment variables are the only historical institutional factors that explain cross-country variation in financial system development in Africa. Additionally, this study finds that the institutional enforcement quality and efficiency of the judicial system are the only current institutional factors that explain cross-country variation in financial system development in Africa. Current institutional factors such as the efficiency of the legal property system and the quality of the credit information infrastructure do not appear to have effects on financial system development. Moreover, the institutional enforcement quality seems to be one of the possible channels through which disease endowment affects financial system development in Africa. This study also reveals that there are few statistically significant links among historical and current institutional factors within the African context. To my knowledge, this is the first study to show some of these empirical links among historical institutional factors, current institutional factors, and financial system development for the African context. The main conclusion of this dissertation is that institutional factors seem not to be determinants of financial system development in Africa to a large extent. In essence, institutional factors appear to matter for financial system development in Africa, but not as much as might have been expected judging from many calls for institutional reforms from the World Bank and others. The theoretical and policy implications of the findings of this dissertation are discussed, and future areas of research are also proposed.