General content: Current methods of estimation of cost of capital in the emerging markets are often neglecting various contradictions with the essentials of the model structure and assumptions. As the result of such imprecisions, the cost of equity is often understated (overstated). This thesis will attempt to assess current level of emerging market integration, liquidity and concentration. This will be followed by evaluation of traditional and alternative models for estimation of cost of equity. The author will address several currently available models such as Credit Rating Model, D-CAPM model, various versions of traditional CAPM models. Furthermore, she will compare and contrast their limitations taking into account the context of emerging markets. The testing of the models will be performed on country basis through the means of index data. In the last chapter, discussion of the results and possible improvements of the valuation approaches will take place.

Magister Commercii - MCom / Market Segmentation and style investing have become an essential part of security management over the past 40 years. There are many factors that separate the market, these include economy, investor behaviours, and specific anomalies. Apart, from the segmentation, investors lean towards a few tested investment styles and sectors, which hinder growth, while, dividing the market further. Thus, a major question arises on what really drives asset performance in the South African equity market. An evaluation of the relationship between sector performance and style anomalies over time is essential.

The point of this thesis is to compare classic asset pricing models using historic UK data. It looks at three of the most commonly used asset pricing models in Finance and tests the suitability of each for the UK market. The models considered are the Capital Asset Pricing Model (1964, 65 and 66) (CAPM), the Fama-French 3-Factor Model (1993) (FF3F) and the Carhart 4-Factor Model (1997) (C4F). The models are analysed using a 34 year sample period (1980-2014). The sample data follows the structure explained in Gregory et al (2013) and is compiled of stocks from the London Stock Exchange (LSE). The stocks are grouped into portfolios arranged by market capitalisation, book-to-market ratio, past 2-12 month stock return and past 12 month standard deviation of stock return. Statistical analysis is performed and the suitability of the models is tested using the methods of Black, Jensen \& Scholes (1972), Fama \& MacBeth (1973) and Gibbons, Ross \& Shanken (1989). The results compare descriptive and test statistics across the range of risk factors and test portfolios for the each testing method on all three models. They show that although the UK market has some noticeable factor anomalies, none of the models clearly explains the 1980-2014 stock returns. However, of the three models, C4F shows the highest explanatory power in predicting stock returns.

Value and momentum strategies have been heavenly researched in financial academic literature. In this essay, different portfolios based on value and momentum strategies have been constructed to examine if it is possible to exploit market anomalies to outperform market returns. Both value and momentum is seen as two market anomalies according to earlier literature. The test were made on the Swedish market, and all data were collected from the Nasdaq OMX Stockholm Large Cap list. The findings includes a significant outperformance of market returns in nearly all portfolio tested, as well as lower standard deviations for some. However, an empirical asset pricing model, based on four factors from the Swedish market were constructed to seek explanation for the results. Overall the factor variables were rejected on their statistical significances, except for the market factor which were statistical significant for all portfolios except one.

This dissertation studies the impact of multiple pre-specified sources of risk in the return of three non-overlapping groups of countries, through an Arbitrage Pricing Theory (APT) model. The groups are composed of emerging and developed markets. Emerging markets have become important players in the world economy, especially as capital receptors, but they were not included in the majority of previous related works. Two strategies are used to choose two set of risk factors. The first one is to use macroeconomic variables, as prescribed by most of the literature, such as world excess return, exchange rates, variation in the spread between Eurodollar deposit tax and U.S. Treasury bill (TED spread) and change in the oil price. The second strategy is to extract factors by using a principal component analysis, designated as statistical factors. The first important result is a great resemblance between the first statistical factor and the world excess return. We estimate the APT model using two statistical methodologies: Iterated Nonlinear Seemingly Unrelated Regression (ITNLSUR) by McElroy and Burmeister (1988) and the Generalized Method Moments (GMM) by Hansen (1982). The results from both methods are very similar. With macroeconomic variables, only the world excess of return is priced in the three groups with a premium varying from 4.4% to 6.3% per year and, in the model with statistical variables, only the first statistical factor is priced in all groups with a premium varying from 6.2% to 8.5% per year. / Essa dissertação estuda o impacto de múltiplas fontes de riscos pré-especificados nos retornos de três grupos de países não sobrepostos, através de um modelo de Teoria de Precificação por Arbitragem (APT). Os grupos são compostos por mercados emergentes e desenvolvidos. Mercados emergentes tornaram-se importantes na economia mundial, especialmente como receptores de capital, mas não foram inclusos na maioria dos trabalhos correlatos anteriores. Duas estratégias foram adotadas para a escolha de dois conjuntos de fatores de risco. A primeira foi utilizar variáveis macroeconômicas, descritas na maior parte da literatura, como e excesso de retorno da carteira mundial, taxas de câmbio, variação da diferença entre a taxa de depósito em Eurodólar e a U.S. Treasury Bill (TED Spread) e mudanças no preço do petróleo. A segunda estratégia foi extrair fatores de risco através de uma análise de componentes principais, denominados fatores estatísticos. O primeiro resultado importante é a grande semelhança entre o primeiro fator estatístico e o retorno da carteira mundial. Nós estimamos o modelo APT usando duas metodologias estatísticas: Regressões Aparentemente não Correlacionadas Iteradas (ITNLSUR) de McElroy e Burmeister (1988) e o Método dos Momentos Generalizados (GMM) de Hansen (1982). Os resultados de ambas as metodologias são muito similares. Utilizando variáveis macroeconômicas, apenas o excesso de retorno da carteira mundial é precificado nos três grupos com prêmios variando de 4,4% a 6.3% ao ano e, no modelo com variáveis estatísticas, apenas o primeiro fator estatístico é precificado em todos os grupos com prêmios que variam entre 6,2% a 8,5% ao ano.

Capital Asset Pricing Model (CAPM) is the most widely used model in asset pricing. This model evaluates the asset return in relation to the market return and the sensitivity of the security to the market. However, the evidence supporting the CAPM is mixed. Alternatives to the CAPM in determining the expected rate of return on portfolios and stocks was introduced through the Arbitrage Pricing Theory and through the Intertemporal CAPM. The introduction of these more general models raised the following important question: how should the risk factors in a multifactor pricing model be specified? Since the multifactor model theory is not very explicit regarding the number or nature of the factors the selection of factors has, to a large extent, become an empirical issue. In the first and the second chapters, we conduct an exhaustive evaluation of multifactor asset pricing models based on observable factors. In the first chapter we find strong evidence that a multifactor pricing model should include the market excess return, the size- , and the value premium. In the second chapter we relax the assumption of normal distributed returns. Even if this new setup does not alter the selected factors, we found strong evidence of deviation from normality which makes our approach more appropriate. In contrast to the first two chapters, the third chapter takes the approach of using latent factors. Using data from the US market, 4 to 6 pervasive factor were generally found. Furthermore, the data speaks in favor of an approximate factor structure with time series dependence across assets. In the final chapter, we examine if a momentum strategy, is superior to a benchmark model once the effects of data-snooping have been accounted for. Data snooping occurs when a given set of data is used more than once for inference or model selection. The result shows that data-snooping bias can be very substantial. In this study, neglecting the problem would lead to very different conclusions. For the US data there is strong evidence of a momentum effect and we reject the hypothesis of weak market efficiency. For the Swedish data the results indicates that momentum strategies based on individual stocks generate positive and significant profits. Interestingly, a very weak or none at all, momentum effect can be found when stocks are sorted by size, book-to-market and industry. / Diss. Stockholm : Handelshögskolan, 2005. Johan Parmler hette tidigare Johan Ericsson.

Submitted by Maike Costa (maiksebas@gmail.com) on 2017-09-01T12:06:36Z No. of bitstreams: 1 arquivototal.pdf: 2312324 bytes, checksum: bb651f68a0df8d950d036c27e29b0651 (MD5) / Approved for entry into archive by Viviane Lima da Cunha (viviane@biblioteca.ufpb.br) on 2017-09-01T14:27:52Z (GMT) No. of bitstreams: 1 arquivototal.pdf: 2312324 bytes, checksum: bb651f68a0df8d950d036c27e29b0651 (MD5) / Approved for entry into archive by Viviane Lima da Cunha (viviane@biblioteca.ufpb.br) on 2017-09-01T14:30:29Z (GMT) No. of bitstreams: 1 arquivototal.pdf: 2312324 bytes, checksum: bb651f68a0df8d950d036c27e29b0651 (MD5) / Made available in DSpace on 2017-09-01T14:30:47Z (GMT). No. of bitstreams: 1 arquivototal.pdf: 2312324 bytes, checksum: bb651f68a0df8d950d036c27e29b0651 (MD5) Previous issue date: 2017-02-17 / Coordenação de Aperfeiçoamento de Pessoal de Nível Superior - CAPES / This thesis aimed at analyzing the characteristics, determinants and implications of communality in liquidity for the Brazilian stock market. The analyzed sample consisted of, on average, 130 shares per year, of the companies listed on the São Paulo Stock Exchange - BM&FBOVESPA, from January 2007 to December 2015. Initially, it was sought to investigate the existence of commonality in Liquidity in the Brazilian stock market and to identify the economic-financial characteristics of the companies that made up the sample. With the use of financial volume as a measure of share liquidity, it was verified that commonality is a phenomenon present in the Brazilian stock market and that its highest values were concentrated in periods of international financial crises. In addition, it was verified the existence of a size effect on the commonality, that is, as the size of the company increases, a greater commonality in the liquidity is observed. Next, it was sought to analyze the determinants of commonality in liquidity, based on explanations on the supply side. It has been found that past commonality exerts a positive influence on the concomitant commonality. In addition, the negative influence of the market return and the positive influence of market volatility on the commonality in liquidity, showed that the commonality may be greater in periods of crisis due to capital restriction, however, it was verified that crises and the loss of Brazil's investment grade were not significant in explaining the commonality. In addition, it was sought to verify the influence of the foreign investor on the commonality with the use of five variables. The results showed that the participation of the foreign investor, measured by foreign purchases (CE) and foreign exchange participation (PECB), is significant to reduce the commonality in liquidity and that the output of foreign resources influences directly the increase of commonality. Finally, with the use of portfolios, it was sought to verify if the investors were compensated for dealing with the commonality. A premium of 0.33% per month for liquidity commonality was observed, however, not statistically significant. Regarding the risk factors analyzed, there was a market premium of 0.3% per month, but not significant. In relation to the size factor and the B/M factor, the results obtained disqualify the effect size and the effect value in the Brazilian stock market, since there was a negative premium for the risk factors of 0.005% and 2.516% per month, respectively. As for the moment factor, a monthly premium of 1.24% was obtained, significant at the 5% level. The liquidity factor presented a positive premium, but not statistically significant. Additionally, it was verified that when exposing the premium for commonality to the other risk factors, the market risk factor can capture it. Finally, it was found that commonality in liquidity is a priceless risk factor. / Esta tese teve por objetivo analisar as características, determinantes e implicações da comunalidade na liquidez para o mercado acionário brasileiro. A amostra analisada foi constituída por, em média, 130 ações por ano, das empresas listadas na Bolsa de Valores de São Paulo – BM&FBOVESPA, no período de janeiro de 2007 a dezembro de 2015. Inicialmente, buscou-se investigar a existência da comunalidade na liquidez no mercado acionário brasileiro e identificar as características econômico-financeiras das empresas que compuseram a amostra. Com a utilização do volume financeiro como medida de liquidez acionária, verificou-se que a comunalidade é um fenômeno presente no mercado acionário brasileiro e que os seus maiores valores se concentraram nos períodos das crises financeiras internacionais. Adicionalmente, verificou-se a existência de um efeito tamanho sobre a comunalidade, ou seja, à medida que aumenta o tamanho da empresa, observa-se maior comunalidade na liquidez. Em seguida, buscou-se analisar os determinantes da comunalidade na liquidez com base nas explicações do lado da oferta. Verificou-se que a comunalidade passada exerce uma influência positiva sobre a comunalidade contemporânea. Ademais, a influência negativa do retorno de mercado e a influência positiva da volatilidade de mercado sobre a comunalidade na liquidez demonstraram que a comunalidade poderá ser maior em períodos de crise em virtude da restrição de capital, no entanto, constatou-se que as crises financeiras internacionais e a perda do grau de investimento do Brasil não foram significativas na explicação da comunalidade. Adicionalmente, buscou-se verificar a influência do investidor estrangeiro sobre a comunalidade com a utilização de cinco variáveis. Os resultados demonstraram que a participação do investidor estrangeiro, mensurada pelas compras estrangeiras (CE) e pela participação estrangeira em bolsa (PECB), é significativa para a diminuição da comunalidade na liquidez e que a saída dos recursos estrangeiros influencia diretamente no aumento da comunalidade. Por fim, com a utilização de carteiras, buscou-se verificar se os investidores foram compensados por lidarem com a comunalidade. Observou-se um prêmio de 0,33% ao mês para a comunalidade na liquidez, no entanto, não significativo estatisticamente. Quanto aos fatores de risco analisados, observou-se um prêmio de mercado de 0,3% ao mês, não significativo. Em relação ao fator tamanho e ao fator B/M, os resultados obtidos descaracterizam o efeito tamanho e o efeito valor no mercado acionário brasileiro, uma vez que se verificou um prêmio negativo para os fatores de risco de -0,005% e -2,516% ao mês, respectivamente. Quanto ao fator momento, obteve-se um prêmio mensal de 1,24%, significativo ao nível de 5%. Já o fator liquidez apresentou um prêmio positivo, porém não significativo estatisticamente. Adicionalmente, verificou-se que, ao expor o prêmio para a comunalidade aos demais fatores de risco, o fator de risco de mercado conseguiu parcialmente capturá-lo. Por fim, constatou-se que a comunalidade na liquidez constitui um fator de risco precificável.

Made available in DSpace on 2015-04-16T14:48:55Z (GMT). No. of bitstreams: 1 arquivototal.pdf: 2663788 bytes, checksum: 9f4b6ec2977840f4b55d2adc8afb8a6e (MD5) Previous issue date: 2012-11-27 / Coordenação de Aperfeiçoamento de Pessoal de Nível Superior - CAPES / This dissertation aimed to analyze how investment and ROA are priced and whether them partially explains change stock returns in the Brazilian stock market. Initially, aimed at analyzing whether an investment and ROA premium exists. Secondly, was aimed to compare the performance of alternative three-factor model of Chen, Novy-Marx and Zhang (2010), consisting of a market risk factor, the investment and ROA factors, with the CAPM model and three-factor model of Fama and French (1993), as well as investigate the robustness of the models on commonly known stock market anomalies. To development of the study, it was used stock portfolios and to verify the performance of the model in explaining the changes of stock returns were used a set of time series regression analysis. The population consisted of all non-financial companies with stocks traded on the Bolsa de Valores de São Paulo BM&FBOVESPA, from January 1995 to June 2011.Refering to the risk factors analyzed, it was observed an average market premium of 2,303% per month. With regards to the size and book-to-market factors, it was could not find evidence of them existence in the Brazilian market, since we obtained a negative premium of 0,005% and 2,516% per month, respectively. With regards to the factors based on production, it was found for investment factor a positive and significant premium of 0,698% per month. When it comes to the ROA factor, it was obtained a positive premium of 0,263% per month, however, not statistically significant. In the analysis of portfolios formed by investment and ROA factor, it was expected that stocks with greater investment in assets tend to have lower returns than stocks with the lowest investment. This pattern can be observed, since seven of the nine portfolios formed by stocks lower investment achieved return over the portfolios formed by stocks that performed more investment in the same period, cannot rejected Hypothesis 1. Regarding the expected return, it was expected that the stock portfolios formed by high ROA submit superior returns to the returns of portfolios formed by stocks of low ROA. This pattern was observed in eight of nine portfolios formed, however, the nonexistence of a premium for the factor ROA causes the rejection of the Hypothesis 2. Comparing the three models by the adjusted R2 there was on average a superior model of Fama and French (1993) of 3.6% over the alternative model of three factors and 5.1% over the CAPM. It was observed also that the alternative model of three factors presented behavior similar of the model of Fama and French (1993) when the portfolios are sorted based on volume, momentum, leverage, EBITDA/P and PL. / Esta dissertação teve por objetivo analisar como os fatores investimento e ROA são precificados e se explicam parte das variações dos retornos das ações no mercado acionário Brasileiro. Inicialmente, buscou-se investigar a existência do prêmio para os fatores investimento e ROA. Em seguida, teve-se por objetivo comparar o desempenho do modelo alternativo de três fatores de Chen, Novy-Marx e Zhang (2010), composto pelo fator de risco mercado e os fatores investimento e ROA, com o modelo CAPM e com o de três fatores de Fama e French (1993), bem como investigar a robustez dos modelos baseados nas estratégias de valor. Para o desenvolvimento do estudo, optou-se pelo emprego de emprego de portfólios e, para analisar o desempenho do modelo na explicação das variações dos retornos das ações, foram utilizadas regressões em série de tempo. A população foi composta por todas as empresas não financeiras, com ações negociadas na Bolsa de Valores de São Paulo BM&FBOVESPA, entre 1º de janeiro de 1995 e 30 de junho de 2011. Quanto aos fatores de risco analisados, observou-se um prêmio de mercado de 2,303% ao mês. Em relação ao fator tamanho e ao fator B/M, os resultados obtidos descaracterizam o efeito tamanho e o efeito valor no mercado Brasileiro, uma vez que se verificou um prêmio negativo para os fatores de risco de 0,005% e 2,516 ao mês, respectivamente. Em relação aos fatores baseados na produção, verificou-se para o fator investimento um prêmio positivo e significativo de 0,698% ao mês. Quanto ao fator ROA, verificou-se um prêmio positivo de 0,263% ao mês, no entanto, não significativo estatisticamente. Na análise das carteiras formadas pelo fator investimento e ROA, esperava-se que as ações com maior investimento em ativos tenderiam a apresentar retorno inferior às ações que com menor investimento. Esse padrão pode ser observado, uma vez que sete das nove carteiras formadas por ações de menor investimento obtiveram retorno superior às carteiras formadas por ações que realizaram maior investimento no mesmo período, não se podendo rejeitar a Hipótese 1. Em relação à rentabilidade esperada, esperava-se que as carteiras formadas por ações de alto ROA apresentassem retornos superiores aos retornos das carteiras formadas por ações de baixo ROA. Esse padrão foi observado em oito das noves carteiras formadas, no entanto, a não existência do prêmio para o fator ROA, faz com que a Hipótese 2 seja rejeitada. Comparando-se os três modelos pelo R2 ajustado, observou-se, em média, uma superioridade do modelo de Fama e French (1993) de 3,6% em relação ao modelo alternativo de três fatores e de 5,1% em relação ao CAPM. Observou-se, também, que o modelo alternativo de três fatores apresentou comportamento semelhante ao do modelo de Fama e French (1993) na explicação das anomalias volume e momento, endividamento, EBITDA/P e PL.

This dissertation studies the impact of multiple pre-specified sources of risk in the return of three non-overlapping groups of countries, through an Arbitrage Pricing Theory (APT) model. The groups are composed of emerging and developed markets. Emerging markets have become important players in the world economy, especially as capital receptors, but they were not included in the majority of previous related works. Two strategies are used to choose two set of risk factors. The first one is to use macroeconomic variables, as prescribed by most of the literature, such as world excess return, exchange rates, variation in the spread between Eurodollar deposit tax and U.S. Treasury bill (TED spread) and change in the oil price. The second strategy is to extract factors by using a principal component analysis, designated as statistical factors. The first important result is a great resemblance between the first statistical factor and the world excess return. We estimate the APT model using two statistical methodologies: Iterated Nonlinear Seemingly Unrelated Regression (ITNLSUR) by McElroy and Burmeister (1988) and the Generalized Method Moments (GMM) by Hansen (1982). The results from both methods are very similar. With macroeconomic variables, only the world excess of return is priced in the three groups with a premium varying from 4.4% to 6.3% per year and, in the model with statistical variables, only the first statistical factor is priced in all groups with a premium varying from 6.2% to 8.5% per year. / Essa dissertação estuda o impacto de múltiplas fontes de riscos pré-especificados nos retornos de três grupos de países não sobrepostos, através de um modelo de Teoria de Precificação por Arbitragem (APT). Os grupos são compostos por mercados emergentes e desenvolvidos. Mercados emergentes tornaram-se importantes na economia mundial, especialmente como receptores de capital, mas não foram inclusos na maioria dos trabalhos correlatos anteriores. Duas estratégias foram adotadas para a escolha de dois conjuntos de fatores de risco. A primeira foi utilizar variáveis macroeconômicas, descritas na maior parte da literatura, como e excesso de retorno da carteira mundial, taxas de câmbio, variação da diferença entre a taxa de depósito em Eurodólar e a U.S. Treasury Bill (TED Spread) e mudanças no preço do petróleo. A segunda estratégia foi extrair fatores de risco através de uma análise de componentes principais, denominados fatores estatísticos. O primeiro resultado importante é a grande semelhança entre o primeiro fator estatístico e o retorno da carteira mundial. Nós estimamos o modelo APT usando duas metodologias estatísticas: Regressões Aparentemente não Correlacionadas Iteradas (ITNLSUR) de McElroy e Burmeister (1988) e o Método dos Momentos Generalizados (GMM) de Hansen (1982). Os resultados de ambas as metodologias são muito similares. Utilizando variáveis macroeconômicas, apenas o excesso de retorno da carteira mundial é precificado nos três grupos com prêmios variando de 4,4% a 6.3% ao ano e, no modelo com variáveis estatísticas, apenas o primeiro fator estatístico é precificado em todos os grupos com prêmios que variam entre 6,2% a 8,5% ao ano.

Magister Commercii - MCom / A distinctive phenomenon on the JSE Securities Exchange (JSE) is the market segmentation between the resource sector and the financial and industrial sectors. Criticisms also arise from employing a capitalization-weighted (cap-weighted) index such as the ALSI index when the market is less than perfectly efficient. A study conducted by Vardharah and Fabozzi (2007) also suggests that a correlation exists between sector allocation decisions and the investment styles inherent in portfolios. The uniqueness of the South African stock market is that it is dominated by three major sectors, namely, the financial sector, the industrial sector and the resources sector. The goal of this research is to examine the application of sector influences on the JSE over the examination period 1 January 2003 to 31 December 2013. It is the contention that the cap-weighted ALSI index is price-sensitive and potentially mean-variance inefficient. The study therefore attempts to evaluate the relative meanvariance efficiency of alternative sector allocation strategies versus the cap-weighted ALSI as the optimal risky portfolio on the JSE. Two optimal long-only portfolios that maximises the Sharpe ratio are constructed and compared to the market proxy on the JSE over the examination period from 1 January 2003 to 31 December 2013. A longonly portfolio that comprises the JSE tradable sector indices and includes a cash allocation (risk-free proxy) and a long-only portfolio exclusive of the cash allocation are constructed. The research extends to cross-examine the inter-relationship between sector returns and the investment styles on the JSE using the Carhart (1997) four-factor model. The research further reexamines and updates the market segmentation phenomenon over the extended examination period from 1 January 2003 to 31 December 2013. The practicality of two sector-based multifactor APT models are examined and compared to the single-factor CAPM to determine which of the asset pricing models better explain JSE equity returns. A sector-based two-factor APT model proposed by Van Rensburg (2002) using the JSE sector indices FNDI and RESI as the sector proxies is reexamined and a sector-based three-factor APT model using the JSE tradable sector indices FINI, INDI and RESI as the sector proxies is explored. The optimal long-only portfolio with the cash allocation is found to offer the best meanvariance efficient allocation and the ALSI index represents the most mean-variance inefficient portfolio. The resource sector is found to be the worst performing sector and significantly influences the performance of ALSI. In terms of the style risk influences, the financial sector has a strong value bias and the industrial sector has a moderate value bias, small cap bias and a momentum bias. The resource sector, for the most part, is influenced by growth stocks and has a contrarian tilt. It is also found that the market segmentation phenomenon continues to exist on the JSE. Although the explanatory power of the three-factor APT model and the two-factor APT model is similar, the distinct advantage of the three-factor APT model is that systematic risks could be observed more closely by separating FINI and INDI in the asset pricing model.