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Essays on international capital flows to developing countriesKeskinsoy, Bilal January 2012 (has links)
This thesis investigates international capital flows to developing countries for the period 1970-2006. The first chapter introduces the theoretical and empirical framework of the thesis, motivates it, overviews its building blocks (i.e. the following chapters) and clarifies its approach to the balance of payments. The second chapter reviews the data and shows the overall trends and developments in capital flows to the developing world by focusing on the geographical regions and income groups. The core of the thesis explores the empirical puzzle that although one would expect international capital to flow to capital scarce countries where returns are higher, observation shows that capital flows to richer rather than to poorer countries (the Lucas paradox). To explore this total capital is measured as the sum of foreign direct investment and portfolio equity flows. The third chapter addresses the argument, based on cross-section evidence (Alfaro et al, Rev. Econ. Stats), that including the quality of institutions accounts for the paradox (because richer countries have better institutions they attract more capital) and finds that this only holds if developed countries are included; within developing countries, institutions do not account for the paradox. The fourth chapter extends this by including institutional quality indicators among determinants of capital inflows and employs a variety of panel data estimators; the quality of institutions does not resolve the Lucas paradox, although certain types of institutions are important. The persistence in the paradox and implied non-convergence could be ascribed to the detrimental impacts of negative shocks and volatility in global financial markets or to a Linder-type home bias in international finance. The fifth chapter analyzes volatility, comovement (or contagion risk) and sudden stop (reversibility) of capital flows (foreign direct investment (FDI), foreign portfolio equity investment, long-term and short-term debt flows) using time series econometric techniques for twelve emerging market economies over 1970-2006. This is informative on the pattern and relationship between capital inflows, with implications for accommodating macroeconomic policies in countries receiving inflows. The chapter also addresses the predictions of conventional theory, that differences are associated with the maturity of the capital (long-term vs. short-term), with the information-based trade-off model of Goldstein and Razin (2006), that differences are associated with the structure of the capital (equity vs. debt). In line with the latter, equity flows (FDI and portfolio) are less volatile, more persistent, more predictable and less susceptible to sudden stops than debt flows. Contrary to conventional theory, short-term flows are not more volatile, but there is evidence that correlations and risks of contagion are stronger within the pairs of long-term and equity capital flows than within the short-term capital flows.
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Econometrics of high frequency data and nonnegative valued financial point processesXu, Yongdeng January 2013 (has links)
Econometrics of high frequency data and nonnegative valued financial point process is addressed in an Autoregressive Conditional Duration (ACD) and Multiplicative Error Model (MEM). The basic idea is to model the nonnegative valued point process in terms of the product of a scale factor and an innovation process with nonnegative support. However, when extending such a model into a multivariate setting, the direct use of multivariate MEM model is restricted since conditional distributions for multivariate nonnegative valued random variables are often not available. A common strategy is to reduce the multivariate setting to a series of univariate problems by assuming: a) weak exogeneity. b) the independence of innovation terms. The objects of this thesis are to examine this strategy and develop a general form vector MEM. Three main Chapters have been developed. We begin with the analysis of weak exogeneity. The independence of innovation terms is considered as a special case of weak exogeneity. The simulation study indicates that a failure of the weak exogeneity assumption implies not only inefficient but also biased estimate of the parameters. We then derive an LM test for weak exogeneity and the empirical results indicate that the weak exogneity of duration is often rejected. Chapter 3 discusses the use of lognormal distribution for financial durations and we propose a lognormal ACD model. The empirical results show that lognormal ACD model is superior to Exponential and Weibull ACD model. It performs similarly to Burr or generalized gamma ACD model. In Chapter 4, we release weak exogeneity assumption and propose general form of vector MEM. Based on the results in Chapter 3, we further propose to use the multivariate lognormal distribution for the distribution of the vector MEM for which maximum likelihood is proved as a suitable estimation strategy. The model is then applied to the trade and quotes data from the New York Stock Exchange (NYSE) for the dynamics of trading duration, volume and price volatility. The empirical findings are generally consistent with market microstructure predictions.
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Bank capital : definition, adequacy and issue announcement effectsGallagher, Mark Ashley January 1992 (has links)
This dissertation focuses primarily on potential explanations for bank common stock abnormal returns, and their patterns, coincident with the announcement of bank capital issues. Potential influences considered include increased regulatory pressure, conflicting regulatory and market views of bank capital adequacy and the relative predictability of security type. Where possible, the dissertation is set in both UK and US contexts. The dissertation has four principal research components; (1) a review of historical and contemporary bank capital regulation in the UK and US. Historical analysis indicates that the definition of capital, as determined by its functional properties, is dynamic and qualifies the consistency of its measurement over time. The regulatory control of absolute levels of capital is seen to have influence on bank structural development, costs and risk. The regulatory control of relative bank capital (ie in terms of balance sheet structure) is found to have a long and controversial history in the US and is effective progenitor of the current methodology of bank capital measurement and assessment, such as the Basle Agreement, and contains a number of potentially costly deficiencies. (2) an examination of bank capital issue announcement effects in the UK. Following similar work in the US (eg Keeley 1989) negative abnormal return effects are found associated with the announcements of UK ordinary share issues. Also, evidence hints that an imposed increase in regulatory capital pressure (viz the introduction of a minimum capital ratio regime) causes a reduction in issue announcement effects for ordinary share issues. (3) assessment of the capital adequacy of UK and US banks from a market perspective and in terms of a number definitions of capital; namely equity, regulatory primary capital (US), and the 1992 Basle Agreement capital. Conflict between market and regulatory views of capital adequacy are observed in certain years for primary capital. In terms of the capital structure relevance hypothesis, this suggests particular costs which may influence issue announcement effects. (4) modelling the predictability of UK bank capital issue security type (viz ordinary share and debt) and assessing the hypothesis that it is inversely related to the announcement abnormal returns.
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Export growth, economic growth and real exchange rate in IndonesiaWing-Keung Lo, Kenneth January 2000 (has links)
The thesis studies the export growth, economic growth and real exchange rate in Indonesia. The research is a piece of empirical studies mainly covering the period from 1974 to 1993. Indonesia is an oil-exporting country. Economic recession with high inflation rate in the early eighties prompted the government to undertake a series of economic and financial reforms. It was believed that oil export earnings by itself could not sustain long-term economic growth. Trade reform and devaluation would stimulate high economic growth through diversifying non-oil exports, attracting foreign and domestic capital accumulation. The research presented is a contribution to the study of the linkage between export trade and economic growth on one hand, and export trade and real exchange rate on the other hand in Indonesia. In particular, five issues are examined: 1) The role of export growth in economic development. Export growth may boost a country's demand for output and hence cause higher economic growth. It may also increase economic efficiency through economies of scale and liberalization of exchange control; 2) The issue of export-growth can be extended to the argument of export-led growth hypothesis. The hypothesis states that the continuation of merchandise exports would lead to higher output growth. We examine the validity of the hypothesis in the context of the Indonesian export growth economy; 3) To investigate whether export growth is negatively related to real effective exchange rate volatility by the use of cointegrated VAR approach. Policies to minimize exchange rate volatility reduce unfavourable effects on the volume of exports; 4) Since real exchange rate is an important determinant of exports, its behaviour would be worth examining. We particularly examine whether it is stationary by looking at the theory of purchasing power parity. The nonrejection of the purchasing power parity hypothesis implies stationarity of the real exchange rate; 5) Finally, we examine whether the real exchange rate of Indonesia and that of its trading partners share a common trend. This will be an indication that they can form a common currency area. The idea is incorporated into the theory of generalized purchasing power parity. A common currency policy might therefore contribute to intra- and inter-regional trade in the region of Pacific Rim. Hence the research may shed more insight on economic development in one of the less developing countries.
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Outsourcing the internal audit function with special reference to the UK public and private sectorsYiannakas, Aristodemos January 2000 (has links)
Although not a new phenomenon on the business scene. outsourcing nowadays is occurring on a much broader scale and usually encompasses a wide variety of traditionally in-house activities. There is no doubt that in many cases outsourcing has created new ways and opportunities for growth. It has given organisations the chance to secure high quality services at a lower cost and it has even enabled them to concentrate on their core activities instead of devoting their, at times, scarce resources on peripheral ones. Having to compete in an increasingly global market amid growing antagonism, has forced organisations to harness the benefits of outsourcing while at the same time mitigate many of its potentially damaging effects (e. g. low employee moral, loss of control over the outsourced activity, etc). Evidence suggest that outsourcing has been extensively used in a plethora of activities which are often closely allied with or supporting the organisation's core business. One of the activities that has recently become a target for outsourcing is the internal audit function. This thesis incorporates a comprehensive literature review on the subject of outsourcing in general and that of internal audit in particular. It also includes a detailed analysis of data from a survey that was carried-out in the UK between May and July 1999. In this survey, a number of Finance and Audit Directors from both the public and private sectors took part. From the survey results it is clearly evident that the outsourcing phenomenon is not only limited to the private sector alone. In fact, the public sector has not been left untouched by the outsourcing frenzy either. Apart from looking at the factors acting as the main driving force behind the decision to outsource the internal audit function, the thesis also examines how internal audit is perceived and the likely impact an outsourcing decision may have on auditors' independence and the quality of internal audit service. Results indicate that the respondents consider internal audit to be both a `core' and an `essential' activity. What is also apparent from the results is the perceived value of internal audit, with the clear majority of organisations either having an internal audit function in-house or receiving the service from an outside provider. The main motivating factor behind the decision to outsource the internal audit function has been identified to be the `access to internal auditors with specialised skills. While an auditor with specialist skills may be needed in many cases, adding such a person to the permanent staff is often quite expensive, particularly if his/her skills are required for only a short period of time every year. The research also shows that organisations are, in general, satisfied with the quality of the provided service. One third of the organisations with an in-house internal audit function. stated that in the future at least some, if not all, of their internal audit function could be provided by an outside service provider. Despite showing their preference towards the services of the 'big five' public accounting firms, a significant number of organisations may still consider the use of a specialised internal audit provider'. The use of the same provider for both the internal and external audit services inevitably raises questions regarding the issue of independence and although the majority of organisations outsourcing the internal audit function use two separate providers, not all of them believe that independence is compromised when using one provider.
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The Korean stock market : structure, behaviour and test of market efficiencyKoh, Sung Soo January 1989 (has links)
This thesis evaluates the Korean capital market internationalisation and examines the efficiency of the Korean stock market comprehensively. For this purpose this study is concentrated onthree main areas as follows. First, this thesis evaluates the capital market liberalisation by examining the internal market mechanism and conducting geographical comparisons. The general structure of the Korean securities market and disclosure system are described, and the development of the capital market is reviewed. The liberalisation plan is examined. It is found that the internationalisation plan of the Korean capital market should be gradual and balanced with general economic conditions. Several measures are recommended to enhance the functions of the domestic capital markets. Also comparative characteristics of capital market in the Far East are described, including equity market, bond market, money market, and foreign exchange market. Second, this thesis examines the relationship between the macro economic activities and the capital market in Korea. Using the interest rate model for 14.5 years, the expected inflation is uniformly positively related to inflation. The relations between stock returns and expected inflation, and between stock returns and unexpected inflation showed negative. Thus, the common stocks in Korea are found not hedging against inflation. And real variables influence to real stock returns as fundamental determinants of equity values. However, these real stock return inflation relations are found varying over time. The results of the recent five and half years period showed positive relation or no relation between real stock return and inflation. Third, this thesis examines the efficiency of the Korean stock market at three different levels. In the weak form empirical tests, the results manifest mixed behavior across samples. But the average results by serial correlation analysis, runs analysis, and spectral analysis do not show random walk behavior. In the frequency distribution model, the average results indicate relatively fat tails. In the semi-strong form test, the valuation effects of bonus stock issue announcements are found to react to share prices in a relatively short period. Investors on average cannot get significant abnormal returns. In the strong form test, the excess returns from following the 467 recommendations made by the four Korean stockbrokers turned out to be significant before deducting transactions costs. But considering transactions costs, the abnormal gain is close to zero. In summary, the results show that the Korean stock market in its early stages did not have the ability to help investors to 'relatively correctly price' the shares. More recent evidence shows improved efficiency which is likely to continue as the capital market expands.
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Commercial bank performance in a developing country : a case study of NigeriaAdekanye, Femi Adeyemo Zakaria January 1993 (has links)
Inspite of the fact that banking has been practised in Nigeria for about a hundred years, little is still known about the characteristics of Nigerian banks as well as what factors determine their performance, that are essentially typical of banks operating in developing economies, particularly those of Africa. This study represents a research effort aimed at contributing to the literature on the determinants of commercial bank performance in general, and in developing economies in articular. The study employs univariate tests in addition to both the discriminant and logit techniques of analyses to determine which factor(s) are major determinants of commercial bank performance, using Nigeria as a case study and over the period of Structural Adjustment Programme (SAP) (1987-1989) as well as the last two years prior to this period (1985-1986). We are, thus, able not only to identify these bank performance factors for each year during the five year period (1985-1989), but also to observe the trend over both periods and consequently compare developments pre- and since SAP. It also attempts to identify factors that distinguish Nigerian commercial banks by type of ownership, head-office location as well as banks with technical partners from those without. We establish that managerial efficiency remains the most important determinant of commercial bank performance over both the pre-SAP and SAP periods. Over the entire study period vulnerable banks were shown to be significantly less efficient compared with the resistant banks. With respect to the SAP period we find that such factors as capital adequacy and liquidity have begun to be significant performance factors only since the more recent years of the SAP period. The conclusions from the techniques of analyses were also corroborated by our critical examination of the National Bank of Nigeria, which is perhaps the most financially vulnerable of the operating banks in Nigeria to date. Through this, we establish the critical nature of the composition and actions of a bank's board for its performance. The incessant clashes between the management and boards of Nigerian banks is also established as a significant hinderance to sound bank performance. This has also caught up with the new banks, thereby threatening industy's survival.
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The use of implied methodologies in mathematical financeFlamouris, Dimitris January 2001 (has links)
This thesis has as an objective to explore the uses of implied methodologies in the area of Mathematical Finance. The existing literature broadly separates the ways that implied methodologies can be exploited in to two different categories; for purposes of recovery of the market sentiment and for consistent pricing of exotic and derivatives. I explore and exploit the first use by examining the possibility of using an implied distribution of a mixture of two lognormal distributions in order to predict the macroeconomic event of the sterling pound's exit from the ERM in 1992. Market evidence presented, indicate that the market was indeed expecting a sterling devaluation a few days prior to the exit. Furthermore, the two component lognormal mixtures distribution is proven to be a powerful tool for assessing the market sentiment, especially when there are two possible scenarios for the future movement of the underlying asset. Subsequently, I am using a jump diffusion stochastic process with a Bernoulli distributed jump component, the parameters of which are implicitly derived from observed option prices, for the pricing of exotic options. Closed form valuation expressions are provided within this generalised approach for Asian and Basket options. Furthermore, analytical formulae for the hedging parameters of those exotic products are derived. Monte Carlo simulation confirms the validity of all the results presented in this thesis.
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Financial prediction using non linear classification techniquesAlbanis, George T. January 2001 (has links)
In this thesis, we explore the ability of statistical classification methods to predict financial events in the bond and stock markets. Our classification methods include conventional Linear Dicriminant Analysis (LDA), and a number of less familiar non-linear techniques such as Probabilistic Neural Network (PNN), Learning Vector Quanization (LVQ), Oblique Classifer (OCI), and Ripper Rule Induction (RRI).
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The effect of corporate divestment on shareholder wealth : the UK experienceAfshar, Abdol Karim January 1994 (has links)
This is the first known study of stockmarket reaction to U.K. sell-off announcements. Earlier U.S. studies have found positive market reaction to sell-off announcements. Various of these have aimed to relate the magnitude of marketreaction to factors such as price declaration, completion of agreement and financial strength of divestor. This study also explores the impact of the above factors and their inter-relationships. Typical event-study methodology is used in estimating the size of the unexpected market reaction, the so called abnormal return. Separate analysis of sub-samples is undertaken in this study to help enhance our understanding of market response to corporate sell-offs. Examples of such sub-samples are price/no-price groups and completion/intention groups. This analysis provides explanations for some of the seemingly contradictory U.S. study results. A measure of financial distress, namely the z-score, is introduced to explore the "bankruptcy avoidance" hypothesis. We find a degree of financial distress prior to divestment to be inversely related to abnormal return - a result consistent with market approval for such "distress" sales. Relative size of divested part to parent is also shown to be positively related to abnormal returns. Price declaration seems to be vitally important in generating positive market response. Announcements of completed sell-offs along with the price is even more welcome by the market. Announcement of completed sell-offs with undisclosed price seems to induce market uncertainty and thus negative abnormal returns. Announcement of intended sell-offs with price disclosure as well as our overall sample results both provide statistically significant positive shareholder gains. This, latter finding is in harmony with U.S. studies.
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