Cointegration has important implications for portfolio diversification. One of these is that in order to spread risk it is advisable to invest in markets that are not cointegrated. Over the last several decades communication technology has made the world a smaller place and hence cointegration in equity markets has become more prevalent. The bulk of research into cointegration focuses on developed and Asian markets, with little research been done on African markets. This study compares the Engle-Granger and Johansen tests for cointegration and uses them to calculate the level of cointegration between South African and other global equity markets. Each market is compared pair-wise with South Africa and the results have been that in general South Africa is cointegrated with other emerging markets but not really with African nor developed markets. Short-run analysis with the error correction was carried out and showed that in general markets respond slowly to any disequilibrium. Innovation accounting methods showed that the country placed first in Cholesky ordering dominates the other one. Multivariate cointegration was carried out using three selections of 4, 6 and 8 market portfolios. One of the markets was SA and the others were all chosen based on the criteria that they are not pair-wise cointegrated with SA. The level of cointegration varied depending on the portfolios, as did the error correction rates, impulse responses and variance decomposition. The one constant was that the USA dominated any portfolio where it was introduced. Recommendations were finally made about which market portfolio an investor should consider as most favourable.

Submitted by Ricardo Barão (ricardorbarao@gmail.com) on 2015-10-22T17:20:08Z No. of bitstreams: 1 Ricardo Barão - Thesis - Br.pdf: 1029409 bytes, checksum: c798d4c5b758b979c5d388783dbf989a (MD5) / Approved for entry into archive by Ana Luiza Holme (ana.holme@fgv.br) on 2015-10-22T17:32:07Z (GMT) No. of bitstreams: 1 Ricardo Barão - Thesis - Br.pdf: 1029409 bytes, checksum: c798d4c5b758b979c5d388783dbf989a (MD5) / Made available in DSpace on 2015-10-23T11:42:00Z (GMT). No. of bitstreams: 1 Ricardo Barão - Thesis - Br.pdf: 1029409 bytes, checksum: c798d4c5b758b979c5d388783dbf989a (MD5) Previous issue date: 2015 / Este trabalho tem como objectivo compreender de que forma os investidores veem as energias renováveis: se as veem como parte do sector tecnológico, à espera de novos desenvolvimentos, ou como uma alternativa aos métodos existentes de produção de energia. Para responder a esta questão, foi desenvolvido um modelo de vectores autoregressivos com quatro variáveis de forma a se poder aplicar um Granger causality test e Impulse Response function. Os resultados sugerem que para o período de 2002-2007 à escala global ambas as hipóteses se confirmam, porém de 2009-2014 os resultados sugerem que os investidores não reconhecem as energias renováveis como um ramo do sector tecnológico, neste período. Para além disso, durante o período de 2009-2014, e quando comparados investidores Americanos com Europeus, os resultados sugerem que apenas o último identifica as energias renováveis como uma fonte viável para a produção energética. / This work aimed to understand the investor perception on clean energy: if it is seen as part of the technology sector, awaiting new developments, or as an alternative to the existing energy production methods. To answer this question, a four variable vector autoregression model was developed so that a Granger causality test and Impulse response function could be applied. The results suggest that while both hypotheses were confirmed worldwide for the period 2002-2007, from 2009 to 2014 results suggest that investors do not recognize the field of clean energy as part of the technology sector. Moreover, during the period that ranges from 2009 to 2014, and when comparing the American investor with the European investor, only the latter identifies renewable energy as a viable source of energy production.

The causal relationship between financial development and economic growth is a controversial issue. For developing countries, empirical studies have provided mixed result. This study seeks to empirically explore the relationship and the causal link between financial development and economic growth in two sub-Saharan African countries between 1970 and 2006. The empirical investigation is carried out using time methods and the five most commonly used indicators of financial development in the literature. However, the causal relationship was carried out using two different methods which are the autoregressive distributed lag bounds testing (ARDL) and the vector error correction model (VECM). Using this above methodology the study first found that in both countries there is a positive and long-term relationship between all the indicators of financial development and economic growth which was proxied by the real per capita GDP. With respect to the causality test, the two methods used provide mixed results especially in South Africa. In Cameroon the study found that financial development causes economic growth using the two methods, whereas in South Africa economic growth causes financial development when the VECM method is used, while there is an independence relationship between the two variables in South Africa when using ARDL. / Economics / M.Comm. (Economics)

It has long been accepted that changes in monetary policy have real economic effects; however, the mechanism by which these policy changes are transmitted to the real economy has been the subject of much debate. Traditionally the transmission mechanism of monetary policy has consisted of various channels which include the money channel, the asset price channel and the exchange rate channel. Recent developments in economic theory have led to a relatively new channel of policy transmission, termed the credit channel. The credit channel consists of the bank lending channel as well as the balance sheet channel, and focuses on the demand for credit as the variable of interest. The credit channel is based on the notion that demanders and suppliers of credit face asymmetric information problems which create a gap between the cost of external funds and the cost of internally generated funds, referred to as the wedge. The aim here is to determine the size and lag length effects of changes in credit demand, by both firms as well as households, as a result of changes in interest rates. A secondary, but subordinate, aim is to test for a balance sheet channel of monetary policy transmission. A vector autoregressive (VAR) model is used in conjunction with causality tests, impulse response functions and variance decompositions to achieve the stated objectives. Results indicate that the interest rate elasticity of credit demand, for both firms and households, is interest inelastic and therefore the monetary policy authorities have a limited ability to influence credit demand in the short as well as medium term. In light of the second aim, only weak evidence of a balance sheet channel of policy transmission is found.

This study examines the dynamic relationship between changes in oil prices and the economic policy uncertainty index for a sample of both net oil-exporting and net oil-importing countries over the period 1997:01-2013:06. To achieve that, we extend the Diebold and Yilmaz (2009, 2012) dynamic spillover index using structural decomposition. The results reveal that economic policy uncertainty (oil price shocks) responds negatively to aggregate demand oil price shocks (economic policy uncertainty shocks). Furthermore, during the Great Recession of 2007-2009, total spillovers increase considerably, reaching unprecedented heights. Moreover, in net terms, economic policy uncertainty becomes the dominant transmitter of shocks between 1997 and 2009, while in the post-2009 period there is a significant role for supply-side and oil specific demand shocks, as net transmitters of spillover effects. These results are important for policy makers, as well as, investors interested in the oil market. (authors' abstract) / Series: Department of Economics Working Paper Series

This study examines the dynamic relationship between changes in oil prices and the economic policy uncertainty index for a sample of both net oil-exporting and net oil-importing countries over the period 1997:01-2013:06. To achieve that, an extension of the Diebold and Yilmaz (2009, 2012) dynamic spillover index based on structural decomposition is employed. The results reveal that economic policy uncertainty (oil price shocks) responds negatively to aggregate demand oil price shocks (economic policy uncertainty shocks). Furthermore, during the Great Recession of 2007-2009, total spillovers increase considerably, reaching unprecedented heights. Moreover, in net terms, economic policy uncertainty becomes the dominant transmitter of shocks between 1997 and 2009, while in the post-2009 period there is a significant role for supply-side and oil specific demand shocks, as net transmitters of spillover effects. These results are important for policy makers, as well as, investors interested in the oil market. (authors' abstract)

Research studies on portfolio diversification have tended to focus on developed markets and paid less attention to emerging markets. Traditionally, correlation analysis has been used to determine potential benefits from diversification but current studies have shifted focus from correlation analysis to exploring cointegration analysis and other forms of tests such as the Vector Error Correction Methodology. The research seeks to find if it is beneficial for a South African investor to diversify their portfolio of emerging market equities over a long-term period. Daily weighted share indices for the period of January 1996 to November 2008 were collected and analysed through the application of the Johansen cointegration technique and Vector Error Correction Methodology. Granger Causality tests were also performed to established whether one variable can be useful in forecasting another variable. The study found that there was at least one statistically significant long-run relationship between the emerging markets. After testing for unit roots for all the share indices and their first difference using the Augmented Dickey-Fuller test (ADF), Philips-Perron and Kwiatkowski, Phillips, Schmidt, and Shin (KPSS) unit root tests, similar conclusions were m~de. All the unit root tests and their levels could not be rejected for all the series. However, unit root tests on the first differences were rejected, meaning that all series are of order 1(1) - evidence of cointegration. Simply put, emerging markets tend not to drift apart over time. This suggests that emerging markets offer limited benefits to investors who are looking to add some risk to their portfolios. In addition, the study also found evidence of both unidirectional and bidirectional causality (Granger-Cause tests) between markets. This implies that the conditions for a particular market are exogenous of the other market. The study concludes that emerging markets are gradually adopting the same profile as developed markets.

The goal of the diploma thesis: "Fundamental analysis of RWE AG title" is to determine an intrinsic value of the RWE AG share using detail analysis. The first -- theoretical -- part deals with financial environment where the title is being traded and quoted. This part characterised german indices, mainly index DAX 30, because its component is also RWE AG share. The electronic system Xetra is described here as well. Fundamental analysis itself - including global, sector and enterprise analysis - is the subject of the second section. At the end of this work, the intrinsic value is evaluated and subsequently the forecast is outlined.

The focus of the dissertation is based on the previous research of a relatively new field of environmental governance posed by climate change policy. The implementation of the climate change policy in Europe is then a subject to the discussion over the consistency of that policy with one of the fundamental goals of European integration. That goal is building an internal market as well as ensuring fair competition in such a market. The interaction of these two areas is a key objective of this research work. Given the complexity of the topic, the dissertation, for sake of clarity, is defined more narrowly. On one hand, the thesis provides with an analysis of European climate policy and its main instruments for regulating carbon emissions in the European economy - the European Union emission trading system (EU ETS). On the other hand, the thesis also provides with a description of the European competition policy. The reason is, as mentioned above, that the competition policy is a fundamental policy that guarantees the consistency of the implementation of environmental policies with the building of the internal market. The author analysed in the thesis basic measures implemented within the framework of those with the aim to prove out whether both policies are in mutual accord and whether they do function under the real terms. Based on the results achieved, the author can make following conclusions: The EU ETS mechanism decided for the European Union proved out to be a cost-efficient choice of emission reduction, despite of some temporary weakness that it has. Also, it can be concluded, that the allocation method is the ultimate criterion that determines both the efficiency of the climate action in Europe as well as its compliance with the competition policy. Stemming from that conclusion, there has been some strong evidence given that grandfathering has not been always in line with the state aid rules existing now in the environment protection. Last but not least, the optional use of the Article 10c of the Directive 2003/87/EC seems to be, from what one can say now, fully in line with the state aid rules valid in the European Union. However, further research in this field might be of very use in the future.

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