Includes bibliographical references (leaves. 95-106). / The current contagion literature does not definitely conclude which channels of financial contagion are the most significant in transmitting crises between countries. This paper sets out to fill this gap empirically by determining which contagion channels significantly increase the probability of an incidence of contagion between stock markets. The paper initially establishes the occurrence of contagion across 42 countries during nine economic and/or financial events. It identifies potential channels and classifies them either as channels that spread contagion via weak economic fundamentals, as channels that spread contagion via economic and/or financial links or as channels that spread contagion via investor behaviour.

Includes bibliographical references. / Recent attempts to empirically verify the Sharpe (1964), Lintner (1965), Moss in (1966), and Black (1972) Capital Asset Pricing Model (CAPM) have identified numerous inconsistencies with the model's predictions. A number of variables have displayed evidence of the ability to explain the cross-sectional variation in share returns beyond that explained by data. These anomalous effect have become known as "style effects " or "style characteristics". This thesis sets out to examine the existence and behaviour of these style-characteristics over the period June 1994 to May 2004. A data set of 207 firm-specific attributes is created for all Australian Stock Exchange (ASX) All Ordinaries stocks listed on 1 September 2004. The data are adjusted for both thin trading and look-ahead bias. The study largely follows the tests of van Rensburg and Robertson (2003) who adopt the characteristic-based approach of Fama and Macbeth (1973). Attributes are tested for the ability to explain the cross-sectional variation in ASX share returns beyond that explained by the CAPM and a principal-components-derived APT model. Similar significant characteristics are found when unadjusted and both risk-adjusted returns sets are examined. The set of significant characteristics d e rived from the unadjusted returns test is then simplified using correlation analysis and an agglomerative hierarchical clustering algorithm, resulting in a list of 27 variables that are not highly correlated with each other. These characteristics are divided into nine interpretation groups or combinations thereof, namely: (1) Liquidity; (2) Momentum; (3) Performance; (4) Size; (5) Value; (6) Change in Liquidity; (7) Change in Performance; (8) Change in Size; and (9) Change in Value. While the existence of the anomalies found in prior Australian literature (size, price-per-share, M/B, cashflow-to-price, and short- to medium-term momentum) is confirmed, the PIE effect is not found to be significant in this study. As these previously documented anomalies only cover five of the final 27 characteristics, this paper identifies 2 2 new Australian anomalies. Six style-timing models are evaluated for the ability to forecast the monthly payoffs to the 27 characteristics. A twelve-lag autoregressive model convincingly displays the best performance against moving average and historic mean models. Parametric and nonparametric tests find inconclusive evidence of seasonality in the monthly payoffs to the attributes. The 27 significant style characteristics are then used to construct a multifactor style-characteristics model which comprises a set of factors that are significant when simultaneously cross-sectionally regressed on share returns. The employed construction method yields a five-factor style model for the ASX and comprises: (1) prior twelve-month momentum; (2) book-to-market value; (3) two-year percentage change in dividends paid; (4) cashflow-to-price; and (5) two-year percentage change in market-to-book value. Finally, a step wise procedure is performed using six style-timing models. Five dynamic multifactor expected return models are created and contrast with a static multifactor expected return model similar to that used in van Rensburg and Robertson (2003). The derived expected return models have between three and thirteen factors. While all six models display good forecasting ability, the dynamic (trailing moving average) models all perform better than the static (historic mean) model. This is convincing evidence that the asset pricing relationship follows a dynamic model.

Includes bibliographical references. / The concept of market timing is hardly new. Theoretical work on the predictability of return stretches back for over a century, with substantial empirical work emerging from the 1960s onwards. This study aims to extend the literature by focusing on whether it is possible for an investor, utilising quantitative analytical techniques with available information, to utilise market timing to outperform the JSE ALSI.

Includes bibliographical references. / In this context, this thesis builds on the prior literature on extreme performance by Reinganum (1988), Glickman, DiRienzo and Ochman (2001), O'Neil (2002) and Dong, Duan and Jang (2003), where an extreme winner (loser) is a stock which at least doubles (halves) in a twelve month period. The research is conducted on the JSE Securities Exchange over the ten year period from January 1995 until December 2004. The dataset employed contains monthly data for 213 companies listed on this exchange, incorporating 7807 (5397) unique company months of extreme gain (loss). The data are adjusted for look-ahead bias but not survivorship bias.

Includes abstract. / Includes bibliographical references. / The purpose of this investigation is twofold. First, I study the effect of the sources of public spending on its level. I argue that any impact on public spending from any of its sources (including foreign aid) should be carried over to GDP per capita growth. Of the three sources of public spending (namely central government revenue, foreign aid and external debt), this study finds central government revenue to have the most significant impact on public spending levels. ... Second, the study analyses the link between sources of public spending and growth. After correcting for the potential endogeneity of aid, there is strong evidence to suggest that Sub-Saharan African countries have benefited significantly from the decades of development assistance.

Includes bibliographical references. / In the absence of market imperfections, risk management cannot create value. There would be no demand for hedging instruments (including derivatives) in the absence of taxes, agency costs, information asymmetry or transaction costs. Financial theory proposes two main sets of explanations for risk management: firstly, risk management is a means to maximize firm value by reducing the costs of financial distress (hedging can allow firms to increase debts capacity and raise funds at lower costs), reducing taxation (reducing earnings volatility and therefore decreasing expected taxes) and reducing the effects of information asymmetry. Secondly, the reasons to hedge can be found by reference to economies of scale: the majority of studies have found a positive correlation between firm size and the use of derivatives, although size is believed to be a constraining factor rather than a determining factor for risk management. It is proposed by Schiozer and Saito (2009) that firms in emerging economies such as Brazil, Argentina (and arguably Egypt), manage risks for different reasons when compared to mature economies such as the US. Emerging economies are often characterized by high volatility of exchange and interest rates. Additionally, there is often a scarcity of domestic funding that leads firms to raise funds on foreign capital markets to finance investment projects. Foreign denominated debt has always proved to produce significant risk exposure for emerging market firms. This research was undertaken to gain insight into the use of derivatives by Egyptian firms. The majority of previous research into derivative usage has focused on developed economies with little similar research into emerging economies and even less research into Middle Eastern economies such as Egypt.

The existence of so-called equity market anomalies suggests that factors outside of the traditional asset-pricing models can model share returns. Despite this, there is limited empirical evidence on cash flow metrics as anomalies, and less so on cash flows as a predictor of share returns. The aim of this study is to provide a new insight into the South African equity market by investigating and comparing the extent of return predictability displayed by cash and accrual measures. This research extends the work of Foerster, Tsagarelis and Wang (2017) and investigates previously untested cash-based measures on an untested sample of shares in an emerging market. Fixed effects panel regression models are applied to a dataset consisting of 85 shares listed on the Johannesburg Stock Exchange over the period 2008 to 2018, using cash and accounting variables to test for predictive ability on six-month ahead total share returns. In contrast to the findings by Foerster, Tsagarelis and Wang (2017), the results suggest that accrual-based measures provide more explanatory power for share return variation than cash flow measures. However, using these variables for purposes of earning consistent excess returns requires further investigation. In addition, the strongest regression model consists of both bottom-line earnings and cash flow variables, suggesting that there is predictive power in a combination of traditional profitability and cash flow figures. The value of using such cash flow information in the fundamental investment process has practical implications on asset pricing, the presence of anomalies in financial markets as well as return prediction. Underlying this research is also an inherent test of the level of market efficiency on the JSE. The resulting significance levels suggest that some variation in future returns can be explained by prior movements in company financial figures, which contributes to the understanding of how South African equity markets process and reflect financial data. The study therefore provides evidence to reject a strong-form level of market efficiency and support the argument for a semi-strong form level of market efficiency on the JSE.

No description available.

Most of the empirical research on momentum in finance has been conducted using monthly data and horizons for the formation and holding period of winner and loser portfolio. This research paper studies momentum using a weekly approach and examines strategies that are more flexible than the crowded month-end approach. In particular, this paper is interested in analyzing the legal front-running of month-end momentum strategies by one to five weeks. Furthermore this study analyzes how momentum profits change by using different start dates within a month ("week-effect") as well as within a year ("month-effect") and finds that the second-last week of the month as well as the cluster of months September, October and November exhibit higher Sharpe ratios, more favorable levels of skewness and better protection against downside risk. In addition, this study demonstrates evidence that momentum investing using the widespread "monthend" view is rarely a strictly dominant strategy.

In this thesis we develop an asset pricing model with heterogeneous institutional investors, and we provide a comprehensive analysis of the effects of benchmark heterogeneity on equilibrium prices and portfolio allocations. We find that an institution’s holdings are higher for those assets that are exclusively part of its benchmark, are negative for those assets that are in the other institution’s benchmarks and are zero for the risk free asset. These results imply that correlation across benchmarks is negative. We define a measure of asymmetry between benchmarks and show how it affects asset prices and portfolio allocations. Institutions revert their holdings to their benchmarks when fundamental volatility is high – flight to benchmark – thus creating a demand pressure on the overlapping part of benchmarks, which in turn pushes prices up and market prices of risk down even further. Our model also allows to study the twin stocks discrepancy, the low volatility puzzle and the asset class effect. We conclude our analysis by characterizing an endogenous choice of benchmark, and show that institutions optimally select the same fully diversified index. / 2017-06-01T00:00:00Z