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In this thesis I study two fields of empirical finance: market integration and economic forecasting. The first two chapters focus on studying regional integration of Mexican and U.S. equity markets. In the third chapter, I propose the use of the daily term structure of interest rates to forecast inflation. Each chapter is a free-standing essay that constitutes a contribution to the field of empirical finance and economic forecasting. In Chapter 1, I study the ability of multi-factor asset pricing models to explain the unconditional and conditional cross-section of expected returns in Mexico. Two sets of factors, local and foreign factors, are evaluated consistent with the hypotheses of segmentation and of integration of the international finance literature. Only one variable, the Mexican U.S. exchange rate, appears in the list of both foreign and local factors. Empirical evidence suggests that the foreign factors do a better job explaining the cross-section of returns in Mexico in both the unconditional and conditional versions of the model. This evidence provides some suggestive support for the hypothesis of integration of the Mexican stock exchange to the U.S. market. In Chapter 2, I study further the integration between Mexico and U.S. equity markets. Based on the result from chapter 1, I assume that the Fama and French factors are the mimicking portfolios of the underlying risk factors in both countries. Market integration implies the same prices of risk in both countries. I evaluate the performance of the asset pricing model under the hypothesis of segmentation (country dependent risk rewards) and integration over the 1990-2004 period. The results indicate a higher degree of integration at the end of the sample period. However, the degree of integration exhibits wide swings that are related to both local and global events. At the same time, the limitations that arise in empirical asset pricing methodologies with emerging market data are evident. The data set is short in length, has missing observations, and includes data from thinly traded securities. Finally, Chapter 3, coauthored with John Maheu and Alex Maynard, studies the ability of daily spreads at different maturities to forecast inflation. Many pricing models imply that nominal interest rates contain information on inflation expectations. This has lead to a large empirical literature that investigates the use of interest rates as predictors of future inflation. Most of these focus on the Fisher hypothesis in which the interest rate maturity matches the inflation horizon. In general, forecast improvements have been modest. Rather than use only monthly interest rates that match the maturity of inflation, this chapter advocates using the whole term structure of daily interest rates and their lagged values to forecast monthly inflation. Principle component methods are employed to combine information from interest rates across both the term structure and time series dimensions. Robust forecasting improvements are found as compared to the Fisher hypothesis and autoregressive benchmarks.

Aim: The purpose of this study is to create new insights for service marketing in emerging markets by investigating the applicability of the literature on problems (that stem from the unique characteristics of services) that occur during the service marketing process of business consulting companies, and the strategies to cope with these problems. Additionally, this paper intends to elucidate the extent to which the position on the emerging market spectrum was related to the problems (that stem from the unique characteristics of services) during the service marketing process, and the strategies to cope with these problems. / <p>Master Thesis Kevin Siemons &amp; Henrik Steybe</p>

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In this thesis the distinctive features and challenges of the company valuation in emerging markets are presented. The valuation approach considered as superior in comparison to other methodologies, the triangulating method, is applied to a company from the emerging market of Brazil, the aircraft manufacturer Embraer. The triangulation valuation approach comprises one primary method, the scenario discounted cash flow valuation, and two secondary approaches, the valuation based on multiples and the valuation with a country-risk built into the cost of capital. At the beginning, the valuation methods prevalent in developed markets are presented. Afterwards, for the emerging markets, the applicability of these approaches from the developed world is assessed. In addition, potentially useful modifications are identified. In advance of the detailed valuation of Embraer, the Brazilian macroeconomic situation and its main financial market, the Bolsa de Valores, Mercadorias & Futuros de Sao Paulo (BOVESPA), will be analyzed.

The outcome of this research paper provides guiding principles to policymakers in emerging markets at a specific policy level in an effort to stimulate entrepreneurial growth and, in turn, increased economic growth. Seven hypotheses relating to either starting a business or the ease of continuing to do business were assessed. The study was completed using a sample of seven emerging markets including Argentina, Brazil, Chile, China, India, Russia and South Africa. Data was sourced from the World Bank and Global Entrepreneurship Monitor. Two multiple regression models were produced to compare the BRICS markets sample to the total sample. It showed that the complexity and time to start a business were not significant to the total sample but were influential within the BRICS countries. Similarly, complexity and time to enforce a contract was proven significant to the BRICS markets but not within the total sample. The total tax rate and the number of tax payments were influential in both models, whilst the time to prepare and pay taxes was significant only within the total sample. The cost to start to start a business did not prove to be significant in either case. Several practical recommendations have been provided to leverage these findings. / Dissertation (MBA)--University of Pretoria, 2012. / Gordon Institute of Business Science (GIBS) / unrestricted

This research seeks to provide a more concise understanding of multinational Greenfield strategies in emerging markets. A lot has been written pertaining to their conduct in established markets and this has proven inadequate as far as application to emerging markets is concerned. Scholars have developed theories on how multinationals operate but how practical are they on the ground?A two case study approach was seen as the most effective way to grasp the complexities involved in managing multinational firms in emerging markets. The scope was limited to sub Saharan Africa with two retail giants Shoprite and Game being the subject of scrutiny. Literature was developed on the basis of results of previous research and enhanced by in-depth interviews with top retail managers directly involved in the expansion process. Similarities and contrasts between the two firms’ strategies where examined with the aim of acquiring insights on retail Greenfield investments in emerging markets.The findings revealed that in emerging markets successful MNEs are the ones that target customers at the bottom of the pyramid whilst internalising risk and constraints within the context of institutional voids. / Dissertation (MBA)--University of Pretoria, 2012. / Gordon Institute of Business Science (GIBS) / unrestricted

This report considers emerging market multinational enterprise (MNE) maturity paths, with particular reference to firms with a South African origin and the choice of location for the corporate headquarters. A generalised model describing the internationalisation of globalised Emerging Market multinational enterprises is developed, describing three possible trajectories. That is, headquarter relocation, acquisition by another MNE or remaining independent in the country of origin. It is argued that Emerging Markets have offered less location advantage than Developed Markets to multinational enterprise headquarters. Using factor data for 46 nations, significant evidence is found to support this argument. Further, two arguments are built on this conjecture: that Emerging Market multinational enterprises have relocated headquarters to Developed Markets, not to other Emerging Markets, and that firm behaviour was predicted by concentration of private shareholding, levels of state ownership and levels of foreign business interest. Using a firm level sample of 61 South African companies, some evidence was found to support these arguments in this specific context. The implications of the results are considered for policy makers as well as managers, and recommendations for further research are made. Copyright / Dissertation (MBA)--University of Pretoria, 2010. / Gordon Institute of Business Science (GIBS) / unrestricted

Using a panel data set of 62 countries from 1995 through 2013, the effects of financial openness on changes in entrepreneurship rates in the economy are estimated for emerging and developed markets. Controlling for the effects of political risk in conjunction with capital controls, capital controls have a negative effect on entrepreneurialism in emerging market countries, but can have a positive effect on entrepreneurialism in developed markets. The imposition of financial controls have a greater effect in magnitude in developed markets than in emerging markets, indicating that development of the internal financial system plays a role in extenuating the effects of capital controls. The effect of the imposition of financial controls is not uniform across the various financial instruments. In particular, the imposition of capital controls on derivatives and real estate in developed markets is associated with a negative effect on entrepreneurialism, unlike for other financial instruments in developed markets. However, in emerging markets, the effects on entrepreneurialism of financial controls seems to be more uniform when controlling for the interaction of political risk and financial controls. In controlling for the effects of political risk on financial liberalization, the effects of financial controls between emerging markets and developed markets are not the same. In general, the imposition of financial controls in emerging markets is associated with a decline in entrepreneurialism, while the imposition of such controls in developed markets is associated with an increase in entrepreneurial activity.

Yes / This study investigates how buyer-supplier interfirm networks with foreign affiliates affect the internationalization of local firms in developing countries. In a study of 1601 sub-Saharan African manufacturing firms, we find that foreign supply linkages positively influence firm internationalization, but this does not relate to marketing linkages. We further examine the role of absorptive capacity and find that both potential and realized absorptive capacity has positive and independent effects on firm internationalization. However, potential absorptive capacity has no moderating effect and realized absorptive capacity negatively moderates the relationship between foreign supplying networks and internationalization. Finally, implications for public policy and managerial practice are discussed.