Este trabalho tem como objetivo testar quais são as características dos Conselhos de Administração de 20 bancos, com capital aberto, no Brasil, no período compreendido entre os anos de 2007 a 2013, bem como detectar a influência das mesmas sobre a Rentabilidade do Ativo (ROA), Rentabilidade do Patrimônio Líquido (ROE) e a Razão Valor de Mercado (RVM). Para alcançar esses objetivos foram levantadas características relevantes que envolvem os Conselhos de Administração (CA) dos bancos, apoiando-se nas recomendações do Comitê de Basileia sobre o que se exige da estrutura desses Conselhos como instrumento de governança. Além das instruções do Comitê, outros artigos científicos, envolvendo dados dos CA e sua provável influência sobre a rentabilidade, foram referenciados. Após o levantamento das variáveis do CA utilizou-se uma análise de regressão múltipla para avaliar se as mesmas influenciam ou não e, em que dimensão elas interferem na rentabilidade dos bancos. Os resultados foram divididos em duas partes: a primeira levou em conta a alavancagem de controle do maior acionista de cada banco no período estudado e, a segunda considerou como uma das variáveis independentes a alavancagem de controle dos três maiores acionistas, entre os anos de 2007 a 2013. Através do resultado estatístico de uma análise quantitativa constatou-se que as características do CA influenciam, em intensidades diferentes, o ROA, ROE e o RVM. Quanto ao ROE e ao ROA, os menores níveis de Governança Corporativa (GC) demonstraram influências negativas para os dois tipos de controle, enquanto que o maior nível, o 3, mostrou influenciar positivamente o resultado. O número de componentes do CA refletiu, positivamente, sobre a rentabilidade. Porém, um aumento ocasionaria um decréscimo na mesma. As variáveis de controle influenciaram em pelo menos uma das variáveis dependentes. O estudo estatístico apresentou um importante resultado sobre a GC em bancos brasileiros. Esse aspecto pode servir de suporte ao investidor em sua tomada de decisão, pois evidencia que as variáveis abordadas devem ser consideradas quando forem verificados os retornos. / This study aims to test some characteristics of the Board of Directors of 20 publicly traded banks in Brazil in the period of 2007 to 2013, to determine whether these influence the Return on Assets (ROA), Return on Equity (ROE) and market value ratio (MVR).To achieve these goals, some relevant features that involve the Board of Directors (BoD) of banks were prospected, based on recommendations of the Basel Committee about the demands on the structure of these councils as instruments of governance. Scientific articles involving characteristics of the BoD and the possible influence on profitability were also considered. Once the BoD variables are set up, a multiple regression analysis was applied to assess whether, and how, the characteristics of the BoD influence the profitability of banks. The tests were divided into two parts: the first considering the leverage control of the largest shareholder of each bank, in every year; and the second had as one of the independent variables to leverage control of the three largest shareholders in the same period. Through the statistical results of a quantitative analysis, it was observed that the characteristics of the BoD influence, at different intensities, ROA, ROE and MV. In consideration of ROE and ROA, lower levels of Corporate Governance (CG) showed negative influences for both types of control, while the higher level, 3, resulted positive influence in the result. The number of members of the CA correlated positively with profitability. The control variables influenced on at least one of the dependent variables. Through this study, a significant statistical result is presented about GC in Brazilian banks. This may support the investor in his decision-making, highlighting that these variables must be considered when returns are checked.

In recent years, the financial service industry demonstrated substantial growth of Exchange Traded Funds (ETFs). Apart from offering access to new and more specific investment opportunities, many ETFs enter direct competition with conventional, already existing Mutual Index Funds. With 22,1% growth of assets over the past 5 years, the European market by now accounts for 19% of the global ETF market, while at the same time we observe a decline of cash flows to Mutual Index Funds. Given the recent development, index investors are likely to face a choice between ETFs and Mutual Index Funds offering the same service. The purpose of this study is to analyze those two similar investment instruments towards the quality of achieving their objective, which is to deliver a performance as close as possible to the respective benchmarks'. The analysis will be performed for the European market, i.e. we include only Index Funds that track European indices. This study is guided by objectivism and positivism as ontological and epistemological positions. We conduct a deductive research by reviewing and testing previous findings through the formulation of hypotheses that serve our purpose. For our analysis we gather quantitative data in the form of daily prices for 21 ETFs and 22 Mutual Index Funds, tracking 9 European indices. We further use a time frame of 7 years (2006-2012), which we analyze as a whole as well as divided into sub-periods as determined by different states of the European market. As a basis for the analysis we calculate return differences and different measures of tracking risk. Our results show that on average ETFs as well as Mutual Index Funds sufficiently replicate index performance with approximately the same level of tracking risk for both instruments. Furthermore, we see no significant impact of expected returns or index volatility on return difference. However, through examination of fees and tracking errors during recent economic turmoils, we show that ETFs first bear lower directly attributed costs and second are less affected by down markets than Mutual Funds.

This research mainly tries to confirm the relationship between distress risk and stock returns in the Taiwan market. According to three factor theory raised by Fama-French (1992), the higher book-to-market ratio brings higher stock returns because of the higher distress risk, and also mentioned about the three significant factors in explaining expected stock return: risk, firm size, and book-to-market ratio (here replace it with price-to-book ratio). There are many studies had proved that high risk accompanies high expected stock return, but some other obtained the contrary outcome. It still depends on different characteristics of enterprises, industries, and countries. Following other researches, this paper use ¡§Z-Score¡¨ bankruptcy prediction model as the proxy of distress risk, and take the subsequent realized stock returns of the distress publicly-traded firms as a proxy of systematic risk. As it may be doubted of using Z-Score in the Taiwan stock market, this research add ¡§TCRI¡¨ to compare with. ¡§TCRI¡¨ is the credit rating score raised by Taiwan Economic Journal (TEJ). Because of the same results of rating on sample companies, it supported the application of Z-Score in Taiwan stock market. In analyzing the relationship between distress risk and stock return, this research find that firm size, distress risk and price-to-book ratio effect are significant enough to explain the expected stock return,(although distress risk and price-to-book ratio are only significant in Y-3) similar to the findings of Fazilah Samad (2009) et al. This research also found that the theoretical expectation of the size effect on distress risk does not hold in the case of the Taiwan distress publicly-traded firms, but price-to-market ratio (PB ratio) does. Unlike the findings of Fazilah Samad (2009) et al. and Griffin and Lemmon (2002), the outcome shows that there is a significant inverse relationship between PB ratio and distress risk, similar to the theory and our original expectation. It directly proved that the lower PB ratio brings higher distress risk in Taiwan market, but inconclusive to deduce that it also brings higher stock return. Meanwhile, this research tries to find out if there is a difference between distress companies and most distress companies. Besides of firm size, there is no significant difference between these two groups, and they are similar as it was closer to distress happened. Although there is not significant relationship between three factors and stock return, this study reveals the decreasing trend of financial performance among those distress firms before facing distress circumstances. It shows again that Z-Score is suitable for Taiwan market although our sample companies including manufacturing and non-manufacturing companies.

Investors have historically demanded a return premium for taking on the risk of illiquidity both in terms of characteristic and systematic liquidity risk. Recent research have presented results suggesting that the liquidity premium is diminishing. The increasing popularity of passive investments such as Exchange Traded Funds (ETFs) have been proposed as a driving force for the declining trend. Despite the popularity of ETFs, there is limited research how they impact the financial markets. The purpose of this thesis is to investigate how the liquidity premium has developed in the United States between 1997 and 2016 and to explore if developments in the liquidity premium can be linked to the capital inflow to the United States ETF market. The thesis uses measures of stocks’ spreads and order book depths as proxies for the characteristic and systematic liquidities. The proxies are used to test if liquidity has influenced stock returns over 1-year, 5-years and the entire 20-year period. The empirical results obtained through Fama-MacBeth regressions show that the liquidity premium can fluctuate by both sign and magnitude year by year. The characteristic risk premium is negative and significant for the entire 20-year period and the 1-year regressions suggests a clear negative trend. The systematic liquidity premium on the other hand is positive and significant for the entire 20-year period but the 1-year regressions do not show a clear trend. The empirical results show no statistical significance that ETFs influence the liquidity premium. However, the graphical interpretation of the 1-year regressions suggests that the characteristic liquidity premium is negatively correlated with the growth of ETFs. The negative characteristic premium implies that investors are not being adequately compensated for the risk of illiquidity and should therefore avoid a liquidity-based investing strategy which has generated excess return in the past.

Submitted by Cristiane Shirayama (cristiane.shirayama@fgv.br) on 2011-08-20T19:16:46Z No. of bitstreams: 1 DISSERT_IGINO ZUCCHI DE MATTO.pdf: 894398 bytes, checksum: 0d19d1d1f176cfa48f33320690add5cf (MD5) / Approved for entry into archive by Gisele Isaura Hannickel (gisele.hannickel@fgv.br) on 2011-08-22T12:09:40Z (GMT) No. of bitstreams: 1 DISSERT_IGINO ZUCCHI DE MATTO.pdf: 894398 bytes, checksum: 0d19d1d1f176cfa48f33320690add5cf (MD5) / Approved for entry into archive by Gisele Isaura Hannickel (gisele.hannickel@fgv.br) on 2011-08-22T12:15:14Z (GMT) No. of bitstreams: 1 DISSERT_IGINO ZUCCHI DE MATTO.pdf: 894398 bytes, checksum: 0d19d1d1f176cfa48f33320690add5cf (MD5) / Made available in DSpace on 2011-08-22T12:22:43Z (GMT). No. of bitstreams: 1 DISSERT_IGINO ZUCCHI DE MATTO.pdf: 894398 bytes, checksum: 0d19d1d1f176cfa48f33320690add5cf (MD5) Previous issue date: 2011-07-06 / With the ETF going to be used for more sophisticated investors and with the possibility to go on to win representation, either for a passive strategy or strategy combined with more specialized and higher risk assets, this paper seeks to explain and justify the coexistence of these vehicles, which has similar goals, but with different structures. With this objective, the study seeks to analyze the behavior and the effectiveness of passive investment products-funds classified as ETF´s (acronym for Exchange-Traded Fund) and Passive mutual funds in the Brazilian market. Study seeks to benchmark, demonstrating differentiations of products from a technical point of view, validating the behavior of managers and product for final investors. Despite recent academic literature, the study seeks to elucidate potential opportunities and relevant aspects to investors. The objective doesn't include make comparison between active funds and ETF´s in Brazil, only display the figures - returns obtained - in recent periods. Concluding with numeric examples, ETF becomes an attractive to investors as harnessing their potential, the fact this with relevant developments in the markets of Europe and United States, mainly. / Com o ETF passando a ser utilizado por investidores mais sofisticados e com a possibilidade de passar a ganhar representatividade, seja para uma estratégia passiva ou para uma estratégia combinada com ativos de maior risco e mais especializados, este paper busca explicar e justificar a coexistência destes veículos, que tem objetivos semelhantes, mas com estruturas diferentes. Com este objetivo, o estudo busca analisar o comportamento e a eficácia dos produtos passivos de investimentos - fundos classificados como ETF´s (sigla para Exchange-Traded Fund) e Fundos Mútuos Passivos no mercado brasileiro. Buscamos avaliar comparativamente, demonstrando diferenciações dos produtos do ponto de vista técnico, validando o comportamento dos gestores em relação a gestão passiva e de produto para os investidores finais. Apesar de literatura acadêmica recente sobre a comparatividade, o estudo busca elucidar possíveis oportunidades e aspectos relevantes para os investidores. Não é objetivo deste trabalho fazer relação comparativa entre produtos ativos de ações e os ETF´s no Brasil, apenas detalharemos o retorno obtido nos últimos períodos. O trabalho demonstra, com exemplos númericos, que o ETF torna-se um instrumento atrativo aos investidores na medida do aproveitamento de suas potencialidades, fato este com evolução relevante nos mercados da Europa e Estados Unidos, principalmente.

Este trabalho tem como objetivo testar quais são as características dos Conselhos de Administração de 20 bancos, com capital aberto, no Brasil, no período compreendido entre os anos de 2007 a 2013, bem como detectar a influência das mesmas sobre a Rentabilidade do Ativo (ROA), Rentabilidade do Patrimônio Líquido (ROE) e a Razão Valor de Mercado (RVM). Para alcançar esses objetivos foram levantadas características relevantes que envolvem os Conselhos de Administração (CA) dos bancos, apoiando-se nas recomendações do Comitê de Basileia sobre o que se exige da estrutura desses Conselhos como instrumento de governança. Além das instruções do Comitê, outros artigos científicos, envolvendo dados dos CA e sua provável influência sobre a rentabilidade, foram referenciados. Após o levantamento das variáveis do CA utilizou-se uma análise de regressão múltipla para avaliar se as mesmas influenciam ou não e, em que dimensão elas interferem na rentabilidade dos bancos. Os resultados foram divididos em duas partes: a primeira levou em conta a alavancagem de controle do maior acionista de cada banco no período estudado e, a segunda considerou como uma das variáveis independentes a alavancagem de controle dos três maiores acionistas, entre os anos de 2007 a 2013. Através do resultado estatístico de uma análise quantitativa constatou-se que as características do CA influenciam, em intensidades diferentes, o ROA, ROE e o RVM. Quanto ao ROE e ao ROA, os menores níveis de Governança Corporativa (GC) demonstraram influências negativas para os dois tipos de controle, enquanto que o maior nível, o 3, mostrou influenciar positivamente o resultado. O número de componentes do CA refletiu, positivamente, sobre a rentabilidade. Porém, um aumento ocasionaria um decréscimo na mesma. As variáveis de controle influenciaram em pelo menos uma das variáveis dependentes. O estudo estatístico apresentou um importante resultado sobre a GC em bancos brasileiros. Esse aspecto pode servir de suporte ao investidor em sua tomada de decisão, pois evidencia que as variáveis abordadas devem ser consideradas quando forem verificados os retornos. / This study aims to test some characteristics of the Board of Directors of 20 publicly traded banks in Brazil in the period of 2007 to 2013, to determine whether these influence the Return on Assets (ROA), Return on Equity (ROE) and market value ratio (MVR).To achieve these goals, some relevant features that involve the Board of Directors (BoD) of banks were prospected, based on recommendations of the Basel Committee about the demands on the structure of these councils as instruments of governance. Scientific articles involving characteristics of the BoD and the possible influence on profitability were also considered. Once the BoD variables are set up, a multiple regression analysis was applied to assess whether, and how, the characteristics of the BoD influence the profitability of banks. The tests were divided into two parts: the first considering the leverage control of the largest shareholder of each bank, in every year; and the second had as one of the independent variables to leverage control of the three largest shareholders in the same period. Through the statistical results of a quantitative analysis, it was observed that the characteristics of the BoD influence, at different intensities, ROA, ROE and MV. In consideration of ROE and ROA, lower levels of Corporate Governance (CG) showed negative influences for both types of control, while the higher level, 3, resulted positive influence in the result. The number of members of the CA correlated positively with profitability. The control variables influenced on at least one of the dependent variables. Through this study, a significant statistical result is presented about GC in Brazilian banks. This may support the investor in his decision-making, highlighting that these variables must be considered when returns are checked.

O regime de divulgação obrigatória de informações é tido como principal pilar regulatório do mercado de valores mobiliários. Esse status deriva, tradicionalmente, da acepção de que a prestação informacional em níveis satisfatórios viabiliza a adequada tomada de decisão dos investidores, constituindo importante mecanismo de proteção no âmbito do mercado de valores mobiliários, por garantir uma teórica igualdade de condições entre seus participantes, principalmente investidores, ofertantes, intermediários e emissores de valores mobiliários. Adicionalmente, à luz dos pressupostos da hipótese dos mercados eficientes, reputa-se que o regime de divulgação obrigatória de informações, ao garantir a atuação informada dos investidores, promove a eficiência informacional do mercado, contribuindo para que as informações disponíveis sobre determinado valor mobiliário sejam instantaneamente incorporadas ao seu preço, e, consequentemente, para sua precisão. Contudo, tal abordagem, fundamentada nas premissas de que o comportamento dos investidores aproxima-se daquele prescrito pela teoria da escolha racional, e de que a formação dos preços dos valores mobiliários negociados ocorre da forma como proposto pela hipótese dos mercados eficientes, desconsidera aspectos operacionais do mercado e comportamentais dos investidores, que fragilizam a funcionalidade do regime informacional obrigatório com relação à tomada de decisão dos investidores e à promoção da eficiência informacional do mercado. É primordial, assim, contemplar tal fragilidade quando da definição do conteúdo das obrigações informacionais, principalmente diante dos altos custos associados à produção e disseminação de determinadas informações que, teoricamente, seriam úteis à avaliação dos fundamentos econômicos dos valores mobiliários (como, por exemplo, aquelas cuja divulgação pode representar a perda de vantagens competitivas e a inibição do engajamento em projetos inovadores). Por outro lado, o regime informacional obrigatório exerce outras funções no âmbito do mercado de valores mobiliários, que devem ser igualmente consideradas na definição de sua orientação regulatória, dentre as quais incluem-se (i) a redução dos custos de monitoramento e a consequente redução dos custos de agência inerentes às companhias abertas; (ii) a promoção da confiança dos investidores no mercado de valores mobiliários; (iii) a administração da seleção adversa dos emissores de valores mobiliários; (iv) o auxílio no exercício das atividades regulatórias dos órgãos reguladores e autorreguladores; e (v) a viabilização do regime de responsabilidade aplicável aos emissores de valores mobiliários, e, na esfera das ofertas públicas de distribuição, aos ofertantes e às instituições intermediárias. A partir dessas ponderações, e do reconhecimento de que o regime informacional obrigatório presta-se a uma globalidade de funções distintas, que, conjuntamente, justificam seu status de principal ferramenta regulatória do mercado de valores mobiliários, o presente trabalho analisa a funcionalidade do regime aplicável às companhias abertas brasileiras. Concluiu-se, a partir do estudo do amplo arcabouço legal e regulatório definidor do conteúdo das obrigações informacionais as quais as companhias abertas brasileiras estão sujeitas, que o regime informacional atende satisfatoriamente à multiplicidade de funções que o justificam, principalmente após as recentes inovações trazidas pela ICVM 480. Entretanto, não obstante os benefícios gerados pela ampliação do conteúdo informacional obrigatório após a edição da referida norma, não se pode ignorar os potenciais efeitos perversos associados ao excesso de informações que dela podem advir. Adicionalmente, a inflexibilidade do regime informacional obrigatório aplicável às companhias abertas brasileiras, que não contempla diferenciais substantivos em função do porte das companhias, de seu estágio de desenvolvimento e do perfil dos investidores que subscrevem, adquirem ou negociam seus valores mobiliários, não se justifica sob uma ótica de custos e benefícios e certamente impede o acesso de diversas companhias ao mercado de valores mobiliários. / The mandatory disclosure regime is considered the cornerstone of securities regulation. Such status traditionally arises from the recognition that disclosure, in a satisfactory level, makes feasible a precise decision making by investors, establishing an important protection mechanism on securities market once it guarantees a theoretical parity among its participants, mainly investors, offerors and issuers. Additionally, under the assumptions of the efficient market hypothesis, mandatory disclosure regime (guarantying an informed performance of investors), promotes informational efficiency on securities market, allowing instantaneous incorporation of available information to securities prices and, as a consequence, its enhancement. Notwithstanding, such approach, mainly based on the assumption that investors behavior is close to the prescriptions of rational choice theory, and price formation of securities traded occurs as provided by efficient market hypothesis, does not take into consideration some aspects associated with the operation of securities market and behavior of investors that mitigates the functionality of mandatory disclosure regime related to investors decision making and promotion of informational efficiency of securities market. In this sense, the recognition of such aspect on the definition of informational requirements applicable to issuers is essential, mainly in face of the high costs associated with production and dissemination of some information that, theoretically, are useful to valuation of the economic fundamentals of securities (as, for example, information that, once disclosed, may harm competitive advantages of the issuer or discourage engagement in innovative projects). On the other hand, mandatory disclosure regime performs other important functions that shall be equally considered on the definition of its regulatory approach, including (i) reduction of monitoring costs and, as a consequence, of agency costs within publicly traded companies; (ii) promotion of investor confidence on securities market; (iii) management of adverse selection of securities issuers; (iv) assistance to regulatory activities of securities regulators and self-regulatory organizations; and (v) making feasible the liability regime applicable to securities issuers, and, in the scope of public offerings, to offerors and underwriters. Based on these considerations and on the recognition that mandatory disclosure regime serves multiple and different functions that, together, justify its status of main regulatory instrument of securities market, this essay analyses the functionality of mandatory disclosure regime applicable to Brazilian publicly-traded companies. It concludes, departing from the study of the extensive legal and regulatory framework that defines information requirements applicable to Brazilian publicly traded companies, that mandatory disclosure regime satisfies the multiple functions above mentioned, specially after the recent innovations implemented by CVM Rule 480/09. However, despite all benefits arising from the extension of the disclosure regime implemented by the abovementioned rule, potential negative effects associated to overload of information that my emerge from such regulation shall not be ignored. In addition, the inflexibility of the mandatory disclosure regime applicable to Brazilian publicly traded companies, which does not considers tiered requirements according to the size and/or stage of development of companies and sophistication of investors that subscribe, acquire or trade with their securities, is not justified by a cost-benefit standpoint and certainly avoids access of many companies to securities market.

Magister Commercii - MCom / The notion of market efficiency posits that stock prices fully reflect all available information in a timely manner. The efficient market hypothesis (EMH) proposed by Fama (1970) systematically rules out the profitability of information driven investing, and implicitly promulgates a passive market capitalisation weighted investment strategy such as indexing. The appeal of passive strategies has largely been driven by the growth of passive tracking instruments, which allow investors to earn underlying index performance by purchasing a single security such as an exchange traded fund (ETF). On the contrary, proponents of behavioural finance suggest that investors are irrational and subject to psychological biases. Furthermore, the noisy market hypothesis of Siegel (2006) asserts that the deviations from the economic ideal of rationality proposed by the EMH, introduces noise in the market which could lead prices to deviate from their intrinsic values. The resultant drag in performance of market capitalisation weighted indices suggests that the optimal cap-weighted market portfolio promulgated by the modern portfolio theory (MPT) of Markowitz (1952), ceases to be the most mean-variance approach to asset allocation. With the goal of testing the applications of ETF’s, this study first evaluates the performance of passive sector ETF’s in the global equity market. In addition, motivated by the potential inefficiencies of capweighted portfolios, the study tests optimisation based asset allocation techniques, and technical analysis based market timing strategies. The study employs the S&P Global 1200 sector indices and their respective sector ETF’s to test their performances and applications in passive and active investment strategies, over the period from July 5th, 2002 to February 6th, 2015. The ETF’s are evaluated based on their tracking ability and price efficiency. All 10 sector ETF’s possess insignificant tracking errors and successfully replicate the performance of their underlying indices. In addition, the globalsector ETF’s are not price efficient over the study period, as they possess persistent price deviations from their net asset values (NAV’s). Furthermore, the ETF trading strategy based on the relationship between ETF returns and price deviations, proves to be effective in outperforming the passive buy and hold strategy in the majority of the sectors. The sector decomposition of the cap-weighted S&P Global 1200 index which is employed as the market proxy, reveals that its sector allocation remains fairly stable throughout the study period. In contrast, the optimal historical sector composition incurs large changes in sector exposure from year to year and provides substantially superior performance relative to the cap-weighted market portfolio. The cap-weighted portfolio tends to overweight cyclical sectors and underweight resilient sectors during major economic downturns. The long-only, long-short and market neutral strategies developed from the S&P Global 1200 index and its constituent sector indices provide exceptional risk-adjusted performance, and more meanvariance efficient portfolios than the cap-weighted market proxy. The relaxation of the longonly constraint also improves the optimised portfolios risk-adjusted performance, mainly through risk reduction benefits. The performance of the optimised global sector based portfolios also resembles the performances of the global style based optimised portfolios developed by Hsieh (2010), thereby suggesting that the two approaches are analogous. The 3 technical market timing strategies tested in this research provide varying results. The sector momentum portfolios experience significant positive returns during bull markets, however the portfolios incur significant drawdowns during periods of economic turmoil such as the 2008 global financial crisis. As a result, all sector momentum portfolios provide inferior risk-adjusted returns relative to the passive cap-weighted buy and hold strategy. The exponential moving average (EMA) trend timing strategy promulgated by Hsieh (2010) provides impressive risk-management attributes and superior risk-adjusted performance relative to passive buy and hold benchmarks. Similarly, the alternative technical charting heuristics trend timing strategy helps reduce drawdowns during market crashes, however the charting strategy provides inferior cost and risk-adjusted performance relative to the capweighted buy and hold approach due to larger timing errors and longer hedging periods in comparison to the EMA strategy. In addition, the global tactical sector allocation (GTSA) model tests the EMA and technical charting trend timing tools in the context of a global sector portfolio, and the model provides outstanding cost and risk-adjusted performances relative to the passive investing alternatives. The portfolio based GTSA model highlights the benefits of portfolio diversification and successfully hedges market exposure during economic downturns.

>Magister Scientiae - MSc / Motivated by the growing attraction of the mutual fund industries across the world, this research seeks to explore the economic benefits contributed by the South African equity unit trust managers over the period from 1 January 2002 to 2 September 2012. The performance is examined over two sub-periods and the overall examination period, where the first sub-period captures the performance of the unit trusts before the 2007/2008 global financial crisis and the second sub-period captures the devastation in performance of the unit trusts after the crisis. Active fund managers are usually presumed to possess superior abilities in asset allocation, security selection and market timing that assist them to consistently generate abnormal returns on a risk-adjusted basis. This research attempts to test this claim by making a distinction in performance attribution between returns generated as a result of managerial skills and those generated as a result of random chance. The study emerges by first examining the risk-adjusted performance of the South African unit trust managers against the performance of a broad market index proxied by FTSE/JSE All Share Index (ALSI). Six different risk-adjusted performance measures are employed for this purpose. Regardless of the different applications of risk parameters employed by each performance measure, the results reveal that on average, most of the South African unit trust managers do not outperform the market on a consistent basis. The majority of the unit trust managers show good performance during the first sub-period, with subsequent inferiority in performance during the second sub-period. The study further examines the performance of the South African unit trust managers relative to the pre-specified sector benchmarks constructed by following a set of performance attribution techniques proposed by Yu (2008) and Hsieh (2010). The objective of this test is to determine whether the equity unit trust managers are able to create value through their security selection skill in addition to their asset allocation decisions. Consistent with international evidence, the results reveal that returns generated by South African unit trusts are driven mainly by asset allocation activities and stock picking of asset managers do not add significant value. In addition, test results also indicate that South African equity unit trust managers are not good at managing risk as the majority of the unit trusts exhibit higher standard deviation compared to their benchmarks. Furthermore, the study examines the economic value contribution of the South African equity unit trust managers through their market timing activities. In particular, the study attempts to determine whether or not unit trust managers possess the ability to correctly anticipate future market movements. To achieve this, two market timing performance models developed by Treynor-Mazuy (1966) and Henrikson-Merton (1981) are employed. The results reveal that, regardless of the changes in market conditions, South African equity unit trust mangers delivered significantly inferior timing performance in both sub-periods and the overall examination periods that actually destroyed fund values. The paper concludes by stating that investors are better off by investing in cost-effective passive investment vehicles such as exchange traded funds (ETF's).

Magister Commercii - MCom / Since the listing of the Satrix 40 in November 2000, Exchange Traded Fund (ETFs) have grown to become an investment vehicle of choice amongst retail and institutional investors of the Johannesburg Securities Exchange (JSE). Albeit gaining such an enormous traction, investors' remains curious about ETFs ability to successfully replicate the movements of their target benchmark indices and also their capability to yield arbitrage profit opportunity through mispricing. In addition to that, investors are also interested to know whether ETFs as an index tracking investment vehicle are resilient in variously cycles of the economy. Motivated by this gap in the body of knowledge, this research undertakes to evaluate the tracking ability and pricing efficiency of 19 ETFs listed on the JSE over various cycles of the economy. According to Faulkner, Loewald and Makrelov (2013) South African economy experienced the effect of the 2008 global financial crisis between 1 September 2008 and 30 June 2009. For that reason, the examination period of this research is segmented into four main categories namely: full examination period which spans from the launch date of each of the ETF under review until 30 September 2015, pre-crisis period that is between the launch date and 29August 2008, crisis-period dated 1 September 2008 and 30 June 2009 and the post-crisis or the recovery phase being 1 July 2009 through 30 September 2015. The tracking ability results across all the sub-periods suggested that, on average, ETFs yields daily returns which closely resemble that of their target benchmark indices but with relatively high level of volatility. With regard to the tracking error as another tracking ability measurement, it was discovered that the ETFs under review were inadequately replicating the movements of their target benchmark indices irrespective of the economic cycle. In tandem with the evidence documented by Mateus and Rahmani (2014) from the London Stock Exchange (LSE), tracking errors were substantially high during the 2008 global financial crisis as opposed to the prior and the post crisis period. Across all the examination periods, sizeable amount of tracking error was found to be associated to the ETFs which mimics the international broad-market access underlying indices. Amongst other things, the diversity of these indices as well as the trading hours overlap between the JSE and their host market were found to be the key attributing factors. On the contrary, ETFs which replicates most liquid target benchmark indices such as the FTSE/JSE Top 40 index appeared to have lower tracking error on relative basis. In this regard, the liquidity of the FTSE/JSE Top 40 index proved to be the main attribute. Apart from the diversity or the liquidity of indices, the length of the examination period also had a significant influence towards the magnitude of tracking errors. In this instance, shorter examination period were found to be characterised by noise or volatility in the market which makes it difficult for the ETFs providers to promptly rebalance their portfolios and align them to their target benchmark indices. Over and above these factors, this research discovered that tracking errors across all the sub-periods were largely driven by management fees and daily volatility of the ETFs market prices, more especially during the crisis period. On the one hand, trading volume and the effect of dividends distribution had a negative influence towards the magnitude of tracking errors. On the question of how efficient these 19 ETFs are, the empirical findings revealed that significant deviation between the ETFs closing price and the Net Asset Value (NAV) does exist either being a discount or premium. In line with the prior work on the JSE by Charteris (2013), ETFs which mimics local based indices were found to be trading mostly on a discount to the NAV whilst the opposite was true in the case of the international broad-market access ETFs. At the same token, international broad-market access ETFs portrayed sizeable amount of premiums across all the cycles of the economy. In line with the analysis of tracking errors, such enormous premiums were mainly driven by lack of synchronicity in the trading hours between the JSE and host market wherein these ETFs target benchmark indices are listed. Empirical literature suggests that ETFs that exhibit discount and premium which fails to persist for more than one trading day are deemed to be efficiently priced since there is limited opportunity to arbitrage. On that note, this research found that mispricing of ETFs which mimics most liquid indices such as the domestic broad-market access and sectorial indices disappears within a period of one trading day. For that reason, majority of these ETFs were considered to be efficiently priced against their NAV. Contrarily, discounts and premiums exhibited by ETFs which mostly replicate style based and the international broad-market access indices appeared to be persistent even to the fifth trading day. From the attribution point of view, the complexity of these ETFs underlying indices as well as the trading hours overlap between the JSE and the host market of these indices were found to be the main drivers of such level of mispricing. In addition to that, attribution analysis through linear regression proved that transaction cost (bid-ask spread), daily volatility of the ETFs market prices as well as the impact of trading volume had a positive influence towards the existence of discounts and premiums observed across all sub-periods.