Market Orientation in Rapidly Internationalizing Small Companies — Evidence from the Software Industry

For more than a decade, researchers have been aware of the increased pace of small-firm internationalization and the greater effect of these rapidly growing small businesses on the wealth, international trade, and job-creation opportunities of countries. Due to the small size of the home market, Finnish companies have been generally considered highly interested in internationalization. One particular domain in which rapid internationalization has been considered feasible is the global software business, with its knowledge-intensive nature and high growth potential. However, over time the failure rate of small entrepreneurial firms has remained especially high in high-technology markets. One of the reasons for this seems to lie in the fact that these companies are often formed by people with a strong technological background but limited competences in other areas. Further, research on the marketing capabilities of rapidly internationalizing high-tech firms has been scarce thus far. In addition, while there is much research on the first years of operations of rapidly internationalizing companies, it is not well known what becomes of them later on. Therefore, there is a need for more investigation into the managerial mindset, competences and decision-making in these small companies, especially from the perspective of how they acquire and exploit market knowledge, and enhance their networking capabilities in order to promote international expansion. The present study focuses on market orientation in small software firms that internationalize their operations rapidly in global software markets. It builds on qualitative data to illustrate how these companies develop their market-oriented product-market strategies during the process of increasing international commitment. It also shows how they manage their network relationships in order to be able to offer better customer service and to thrive in the fierce global competition. The study was conducted in the empirical context of Finnish small software companies, and the main data consists of interviews with top managers in these businesses. The interviews were designed to cover a minimum period of five years of the company's international operations, thus offering a retrospective in-depth perspective on market orientation, internationalization and partnerships in the given context. One particular focus is on less successfully internationalized software companies, and the challenges they face when approaching international markets. This study makes a significant contribution to the literature on market orientation for several reasons. First, building on data from the software industry, it clarifies the existing theory in the context of rapid internationalization and network relationships. Secondly, it provides a good body of evidence on market orientation in both successfully and less successfully internationalized companies, and identifies the key related differences between the two company groups. Thirdly, it highlights the importance of inter-firm networks in the rapid internationalization of small software firms, providing companies with important market knowledge and, in some cases, management challenges. Fourthly, this investigation clarifies market orientation in the context of different software-product strategies, thus, combining the perspectives of market orientation in both manufacturing and services. In sum, the results of the study are significant for both small software firms and public-policy makers since they shed light on the market-oriented managerial mindset and the market-information gathering and sharing processes that are needed in successful rapid internationalization.

Feasibility Study and Market Review of Small Scale Bioenergy Heating Plants in North-West Russia

The paper is focused on feasibility study and market review of small scale bioenergy heating plants in the Russian North-West region. The main focus is effective and competitive usage of low-grade wood for heating purposes in the region. As example of economical feasibility estimation it was chosen the project of reconstruction of small scale boiler plant in Leningrad region that Brofta Oy is planning to implement the nearest time. It includes calculation the payback time with and without interest, the estimation of probable investments, the evaluation of possible risks and research on the potential of small scale heating plants projects. Calculations show that the profitability of this kind of projects is high, but payback time is not very short, because of high level of initial investments. Though, the development of small scale bioenergy heating plants in the region is considered to be the best way to solve the problems of heat supply in small settlements using own biomass resources.

Essays on pricing of risk and international linkage of Russian stock market

Last two decades have seen a rapid change in the global economic and financial situation; the economic conditions in many small and large underdeveloped countries started to improve and they became recognized as emerging markets. This led to growth in the amounts of global investments in these countries, partly spurred by expectations of higher returns, favorable risk-return opportunities, and better diversification alternatives to global investors. This process, however, has not been without problems and it has emphasized the need for more information on these markets. In particular, the liberalization of financial markets around the world, globalization of trade and companies, recent formation of economic and regional blocks, and the rapid development of underdeveloped countries during the last two decades have brought a major challenge to the financial world and researchers alike. This doctoral dissertation studies one of the largest emerging markets, namely Russia. The motivation why the Russian equity market is worth investigating includes, among other factors, its sheer size, rapid and robust economic growth since the turn of the millennium, future prospect for international investors, and a number of important major financial reforms implemented since the early 1990s. Another interesting feature of the Russian economy, which gives motivation to study Russian market, is Russia’s 1998 financial crisis, considered as one of the worst crisis in recent times, affecting both developed and developing economies. Therefore, special attention has been paid to Russia’s 1998 financial crisis throughout this dissertation. This thesis covers the period from the birth of the modern Russian financial markets to the present day, Special attention is given to the international linkage and the 1998 financial crisis. This study first identifies the risks associated with Russian market and then deals with their pricing issues. Finally some insights about portfolio construction within Russian market are presented. The first research paper of this dissertation considers the linkage of the Russian equity market to the world equity market by examining the international transmission of the Russia’s 1998 financial crisis utilizing the GARCH-BEKK model proposed by Engle and Kroner. Empirical results shows evidence of direct linkage between the Russian equity market and the world market both in regards of returns and volatility. However, the weakness of the linkage suggests that the Russian equity market was only partially integrated into the world market, even though the contagion can be clearly seen during the time of the crisis period. The second and the third paper, co-authored with Mika Vaihekoski, investigate whether global, local and currency risks are priced in the Russian stock market from a US investors’ point of view. Furthermore, the dynamics of these sources of risk are studied, i.e., whether the prices of the global and local risk factors are constant or time-varying over time. We utilize the multivariate GARCH-M framework of De Santis and Gérard (1998). Similar to them we find price of global market risk to be time-varying. Currency risk also found to be priced and highly time varying in the Russian market. Moreover, our results suggest that the Russian market is partially segmented and local risk is also priced in the market. The model also implies that the biggest impact on the US market risk premium is coming from the world risk component whereas the Russian risk premium is on average caused mostly by the local and currency components. The purpose of the fourth paper is to look at the relationship between the stock and the bond market of Russia. The objective is to examine whether the correlations between two classes of assets are time varying by using multivariate conditional volatility models. The Constant Conditional Correlation model by Bollerslev (1990), the Dynamic Conditional Correlation model by Engle (2002), and an asymmetric version of the Dynamic Conditional Correlation model by Cappiello et al. (2006) are used in the analysis. The empirical results do not support the assumption of constant conditional correlation and there was clear evidence of time varying correlations between the Russian stocks and bond market and both asset markets exhibit positive asymmetries. The implications of the results in this dissertation are useful for both companies and international investors who are interested in investing in Russia. Our results give useful insights to those involved in minimising or managing financial risk exposures, such as, portfolio managers, international investors, risk analysts and financial researchers. When portfolio managers aim to optimize the risk-return relationship, the results indicate that at least in the case of Russia, one should account for the local market as well as currency risk when calculating the key inputs for the optimization. In addition, the pricing of exchange rate risk implies that exchange rate exposure is partly non-diversifiable and investors are compensated for bearing the risk. Likewise, international transmission of stock market volatility can profoundly influence corporate capital budgeting decisions, investors’ investment decisions, and other business cycle variables. Finally, the weak integration of the Russian market and low correlations between Russian stock and bond market offers good opportunities to the international investors to diversify their portfolios.

The Market Behavior of Emerging Stock Markets in Europe

This study investigates the over and underreaction effects in nine emerging stock markets of Europe. Especially, the possible behavioral aspects behind them are an area of interest. These aspects would link them strongly to behavioral finance. Second, our aim is to provide more evidence of the similar or dissimilar behavior in general among these countries. Third, the possibility to gain abnormal returns from these markets is also under investigation. Data from nine emerging stock market indexes in Europe is gathered from January 1, 1998 to January 1, 2008 to find answers to the stated questions. Studies for the over and underreaction effects are done using a variant of the event study methodology which in this case includes two different calculation methods for the expected returns. Studies are performed using 60 day time intervals. The results between the two different methods used are relatively similar concerning the over and underreaction effects. Another of the methods, however, suggests there to be behavioral aspects behind the effects interpreted. On the other hand, the another method does not support this suggestion. However, a conclusion can be made that the factors driving these countries' behavior are related to their geographical location and to the fact that they are emerging countries.

A study on rate correlations of gasification reactions

Gasification offers an environmentally friendly alternative for conventional combustion enabling the use of low grade and troublesome fuel such as municipal waste. While combustion converts fuel directly into thermal energy and noxious gases, gasification thermally converts fuel into gas that can be used in multiple applications. The purpose of this work is to get to know the gasification as a phenomenon and examine the kinetics of gasification. The main interest is in the reaction rates of the most important gasification reactions - water-gas, Boudouard and shift reaction. Reaction rate correlations found in the scientific articles are examined in atmospheric pressure in different temperatures.

Added Value of Combining Value and Momentum Indicators in the Swiss Stock Market

The purpose of the thesis is to examine the added value of combining value and momentum indicators in the Swiss stock exchange. Value indicators employed are P/E, EV/EBITDA, P/CF, P/B ja P/S. Momentum indicators examined are 52-week high, acceleration rate, 12-month past return and 6-month past return. The thesis examines whether the composite value measures based on the above mentioned ratios can add value and whether the inclusion of momentum can further improve the risk return profile of the value portfolios. The data is gathered from the Swiss equity market during the sample period from May 2001 to May 2011. Previous studies have shown that composite value measures can somewhat add value to the value portfolio strategy. Similarly, recent academic literature have found evidence that momentum works well as a timing indicator for time to entry to value stocks. This study indicates that the added value of composite value measures exists. It also shows that momentum combined to acceleration rate can significantly improve the risk adjusted performance of value-only portfolios.

Understanding the in vitro dissolution rate of glasses with respect to future clinical applications

Glass is a unique material with a long history. Several glass products are used daily in our everyday life, often unnoticed. Glass can be found not only in obvious applications such as tableware, windows, and light bulbs, but also in tennis rackets, windmill turbine blades, optical devices, and medical implants. The glasses used at present as implants are inorganic silica-based melt-derived compositions mainly for hard-tissue repair as bone graft substitute in dentistry and orthopedics. The degree of glass reactivity desired varies according to implantation situation and it is vital that the ion release from any glasses used in medical applications is controlled. Understanding the in vitro dissolution rate of glasses provides a first approximation of their behavior in vivo. Specific studies concerning dissolution properties of bioactive glasses have been relatively scarce and mostly concentrated to static condition studies. The motivation behind this work was to develop a simple and accurate method for quantifying the in vitro dissolution rate of highly different types of glass compositions with interest for future clinical applications. By combining information from various experimental conditions, a better knowledge of glass dissolution and the suitability of different glasses for different medical applications can be obtained. Thus, two traditional and one novel approach were utilized in this thesis to study glass dissolution. The chemical durability of silicate glasses was tested in water and TRIS-buffered solution at static and dynamic conditions. The traditional in vitro testing with a TRISbuffered solution under static conditions works well with bioactive or with readily dissolving glasses, and it is easy to follow the ion dissolution reactions. However, in the buffered solution no marked differences between the more durable glasses were observed. The hydrolytic resistance of the glasses was studied using the standard procedure ISO 719. The relative scale given by the standard failed to provide any relevant information when bioactive glasses were studied. However, the clear differences in the hydrolytic resistance values imply that the method could be used as a rapid test to get an overall idea of the biodegradability of glasses. The standard method combined with the ion concentration and pH measurements gives a better estimate of the hydrolytic resistance because of the high silicon amount released from a glass. A sensitive on-line analysis method utilizing inductively coupled plasma optical emission spectrometer and a flow-through micro-volume pH electrode was developed to study the initial dissolution of biocompatible glasses. This approach was found suitable for compositions within a large range of chemical durability. With this approach, the initial dissolution of all ions could be measured simultaneously and quantitatively, which gave a good overall idea of the initial dissolution rates for the individual ions and the dissolution mechanism. These types of results with glass dissolution were presented for the first time during the course of writing this thesis. Based on the initial dissolution patterns obtained with the novel approach using TRIS, the experimental glasses could be divided into four distinct categories. The initial dissolution patterns of glasses correlated well with the anticipated bioactivity. Moreover, the normalized surface-specific mass loss rates and the different in vivo models and the actual in vivo data correlated well. The results suggest that this type of approach can be used for prescreening the suitability of novel glass compositions for future clinical applications. Furthermore, the results shed light on the possible bioactivity of glasses. An additional goal in this thesis was to gain insight into the phase changes occurring during various heat treatments of glasses with three selected compositions. Engineering-type T-T-T curves for glasses 1-98 and 13-93 were stablished. The information gained is essential in manufacturing amorphous porous implants or for drawing of continuous fibers of the glasses. Although both glasses can be hot worked to amorphous products at carefully controlled conditions, 1-98 showed one magnitude greater nucleation and crystal growth rate than 13-93. Thus, 13-93 is better suited than 1-98 for working processes which require long residence times at high temperatures. It was also shown that amorphous and partially crystalline porous implants can be sintered from bioactive glass S53P4. Surface crystallization of S53P4, forming Na2O∙CaO∙2SiO2, was observed to start at 650°C. The secondary crystals of Na2Ca4(PO4)2SiO4, reported for the first time in this thesis, were detected at higher temperatures, from 850°C to 1000°C. The crystal phases formed affected the dissolution behavior of the implants in simulated body fluid. This study opens up new possibilities for using S53P4 to manufacture various structures, while tailoring their bioactivity by controlling the proportions of the different phases. The results obtained in this thesis give valuable additional information and tools to the state of the art for designing glasses with respect to future clinical applications. With the knowledge gained we can identify different dissolution patters and use this information to improve the tuning of glass compositions. In addition, the novel online analysis approach provides an excellent opportunity to further enhance our knowledge of glass behavior in simulated body conditions.

Exchange rate volatility and the use of foreign currency derivatives: Impact of 2008 global financial crisis

This thesis examines the impact of foreign exchange rate volatility to the extent of use of foreign currency derivatives. Especially the focus is on the impacts of 2008 global financial crisis. The crisis increased risk level in the capital markets greatly. The change in the currency derivatives use is analyzed by comparing means between different periods and in addition, by linear regression that enables to analyze the explanatory power of the model. The research data consists of financial statements figures from fiscal years 2006-2011 published by firms operating in traditional Finnish industrial sectors. Volatilities of the chosen three currency pairs is calculated from the daily fixing rates of ECB. Based on the volatility the sample period is divided into three sub-periods. The results suggest that increased FX market volatility did not increase the use foreign currency derivatives. Furthermore, the increased foreign exchange rate volatility did not increase the power of linear regression model to estimate the use foreign currency derivatives compared to previous studies.

Market integration, return and volatility dynamics; empirical evidence from African stock markets

Frontier and Emerging economies have implemented policies with the objective of liberalizing their equity markets. Equity market liberalization opens the domestic equity market to foreign investors and as well paves the way for domestic investors to invest in foreign equity securities. Among other things, equity market liberalization results in diversification benefits. Moreover, equity market liberalization leads to low cost of equity capital resulting from the lower rate of return by investors. Additionally, foreign and local investors share any potential risks. Liberalized equity markets also become liquid considering that there are more investors to trade. Equity market liberalization results in financial integration which explains the movement of two markets. In crisis period, increased volatility and co-movement between two markets may result in what is termed contagion effects. In Africa, major moves toward financial liberalization generally started in the late 1980s with South Africa as the pioneer. Over the years, researchers have studied the impact of financial liberalization on Africa’s economic development with diverse results; some being positive, others negative and still others being mixed. The objective of this study is to establish whether African stock-markets are integrated into the United States (US) and World market. Furthermore, the study helps to see if there are international linkages between the Africa, US and the world markets. A Bivariate- VAR- GARCH- BEKK model is employed in the study. In the study, the effect of thin trading is removed through series of econometric data purification. This is because thin trading, also known as non-trading or inconsistency of trading, is a main feature of African markets and may trigger inconsistency and biased results. The study confirmed the widely established results that the South Africa and Egypt stock markets are highly integrated with the US and World market. Interestingly, the study adds to knowledge in this research area by establishing the fact that Kenya is very integrated with the US and World markets and that it receives and exports past innovations as well as shocks to and from the US and World market.

Visual analytics for behavioral and niche market segmentation

Companies require information in order to gain an improved understanding of their customers. Data concerning customers, their interests and behavior are collected through different loyalty programs. The amount of data stored in company data bases has increased exponentially over the years and become difficult to handle. This research area is the subject of much current interest, not only in academia but also in practice, as is shown by several magazines and blogs that are covering topics on how to get to know your customers, Big Data, information visualization, and data warehousing. In this Ph.D. thesis, the Self-Organizing Map and two extensions of it – the Weighted Self-Organizing Map (WSOM) and the Self-Organizing Time Map (SOTM) – are used as data mining methods for extracting information from large amounts of customer data. The thesis focuses on how data mining methods can be used to model and analyze customer data in order to gain an overview of the customer base, as well as, for analyzing niche-markets. The thesis uses real world customer data to create models for customer profiling. Evaluation of the built models is performed by CRM experts from the retailing industry. The experts considered the information gained with help of the models to be valuable and useful for decision making and for making strategic planning for the future.

Households’ willingness to engage in demand response in the Finnish retail electricity market: an empirical study

If electricity users adjusted their consumption patterns according to time-variable electricity prices or other signals about the state of the power system, generation and network assets could be used more efficiently, and matching intermittent renewable power generation with electricity demand would be facilitated. This kind of adjustment of electricity consumption, or demand response, may be based on consumers’ decisions to shift or reduce electricity use in response to time-variable electricity prices or on the remote control of consumers’ electric appliances. However, while demand response is suggested as a solution to many issues in power systems, actual experiences from demand response programs with residential customers are mainly limited to short pilots with a small number of voluntary participants, and information about what kinds of changes consumers are willing and able to make and what motivates these changes is scarce. This doctoral dissertation contributes to the knowledge about what kinds of factors impact on residential consumers’ willingness and ability to take part in demand response. Saving opportunities calculated with actual price data from the Finnish retail electricity market are compared with the occurred supplier switching to generate a first estimate about how large savings could trigger action also in the case of demand response. Residential consumers’ motives to participate in demand response are also studied by a web-based survey with 2103 responses. Further, experiences of households with electricity consumption monitoring systems are discussed to increase knowledge about consumers’ interest in getting more information on their electricity use and adjusting their behavior based on it. Impacts of information on willingness to participate in demand response programs are also approached by a survey for experts of their willingness to engage in demand response activities. Residential customers seem ready to allow remote control of electric appliances that does not require changes in their everyday routines. Based on residents’ own activity, the electricity consuming activities that are considered shiftable are very limited. In both cases, the savings in electricity costs required to allow remote control or to engage in demand response activities are relatively high. Nonmonetary incentives appeal to fewer households.

TAKING ADVANTAGE OF THE LOCAL ADVANTAGE? - Investment value of the analyst local advantage in the Finnish stock market in 2006–2014

An investor can either conduct independent analysis or rely on the analyses of others. Stock analysts provide markets with expectations regarding particular securities. However, analysts have different capabilities and resources, of which investors are seldom cognizant. The local advantage refers to the advantage stemming from cultural or geographical proximity to securities analyzed. The research has confirmed that local agents are generally more accurate or produce excess returns. This thesis tests the investment value of the local advantage regarding Finnish stocks via target price data. The empirical section investigates the local advantage from several aspects. It is discovered that local analysts were more focused on certain sectors generally located close to consumer markets. Market reactions to target price revisions were generally insignificant with the exception to local positive target prices. Both local and foreign target prices were overly optimistic and exhibited signs of herding. Neither group could be identified as a leader or follower of new information. Additionally, foreign price change expectations were more in line with the quantitative models and ideas such as beta or return mean reversion. The locals were more accurate than foreign analysts in 5 out of 9 sectors and vice versa in one. These sectors were somewhat in line with coverage decisions and buttressed the idea of local advantage stemming from proximity to markets, not to headquarters. The accuracy advantage was dependent on sample years and on the measure used. Local analysts ranked magnitudes of price changes more accurately in optimistic and foreign analysts in pessimistic target prices. Directional accuracy of both groups was under 50% and target prices held no linear predictive power. Investment value of target prices were tested by forming mean-variance efficient portfolios. Parallel to differing accuracies in the levels of expectations foreign portfolio performed better when short sales were allowed and local better when disallowed. Both local and non-local portfolios performed worse than a passive index fund, albeit not statistically significantly. This was in line with previously reported low overall accuracy and different accuracy profiles. Refraining from estimating individual stock returns altogether produced statistically significantly higher Sharpe ratios compared to local or foreign portfolios. The proposed method of testing the investment value of target prices of different groups suffered from some inconsistencies. Nevertheless, these results are of interest to investors seeking the advice of security analysts.

Modeling Energy Futures Returns With Markov Regime Switching Model

Financial time series have a tendency of abruptly changing their behavior and maintain this behavior for several consecutive periods, and commodity futures returns are not an exception. This quality proposes that nonlinear models, as opposed to linear models, can more accurately describe returns and volatility. Markov regime switching models are able to match this behavior and have become a popular way to model financial time series. This study uses Markov regime switching model to describe the behavior of energy futures returns on a commodity level, because studies show that commodity futures are a heterogeneous asset class. The purpose of this thesis is twofold. First, determine how many regimes characterize individual energy commodities’ returns in different return frequencies. Second, study the characteristics of these regimes. We extent the previous studies on the subject in two ways: We allow for the possibility that the number of regimes may exceed two, as well as conduct the research on individual commodities rather than on commodity indices or subgroups of these indices. We use daily, weekly and monthly time series of Brent crude oil, WTI crude oil, natural gas, heating oil and gasoil futures returns over 1994–2014, where available, to carry out the study. We apply the likelihood ratio test to determine the sufficient number of regimes for each commodity and data frequency. Then the time series are modeled with Markov regime switching model to obtain the return distribution characteristics of each regime, as well as the transition probabilities of moving between regimes. The results for the number of regimes suggest that daily energy futures return series consist of three to six regimes, whereas weekly and monthly returns for all energy commodities display only two regimes. When the number of regimes exceeds two, there is a tendency for the time series of energy commodities to form groups of regimes. These groups are usually quite persistent as a whole because probability of a regime switch inside the group is high. However, individual regimes in these groups are not persistent and the process oscillates between these regimes frequently. Regimes that are not part of any group are generally persistent, but show low ergodic probability, i.e. rarely prevail in the market. This study also suggests that energy futures return series characterized with two regimes do not necessarily display persistent bull and bear regimes. In fact, for the majority of time series, bearish regime is considerably less persistent. Rahoituksen aikasarjoilla on taipumus arvaamattomasti muuttaa käyttäytymistään ja jatkaa tätä uutta käyttäytymistä useiden periodien ajan, eivätkä hyödykefutuurien tuotot tee tähän poikkeusta. Tämän ominaisuuden johdosta lineaaristen mallien sijasta epälineaariset mallit pystyvät tarkemmin kuvailemaan esimerkiksi tuottojen jakauman parametreja. Markov regiiminvaihtomallit pystyvät vangitsemaan tämän ominaisuuden ja siksi niistä on tullut suosittuja rahoituksen aikasarjojen mallintamisessa. Tämä tutkimus käyttää Markov regiiminvaihtomallia kuvaamaan yksittäisten energiafutuurien tuottojen käyttäytymistä, sillä tutkimukset osoittavat hyödykefutuurien olevan hyvin heterogeeninen omaisuusluokka. Tutkimuksen tarkoitus on selvittää, kuinka monta regiimiä tarvitaan kuvaamaan energiafutuurien tuottoja eri tuottofrekvensseillä ja mitkä ovat näiden regiimien ominaisuudet. Aiempaa tutkimusta aiheesta laajennetaan määrittämällä regiimien lukumäärä tilastotieteellisen testauksen menetelmin sekä tutkimalla energiafutuureja yksittäin; ei indeksi- tai alaindeksitasolla. Tutkimuksessa käytetään päivä-, viikko- ja kuukausiaikasarjoja Brent-raakaöljyn, WTI-raakaöljyn, maakaasun, lämmitysöljyn ja polttoöljyn tuotoista aikaväliltä 1994–2014, siltä osin kuin aineistoa on saatavilla. Likelihood ratio -testin avulla estimoidaan kaikille aikasarjoille regiimien määrä,jonka jälkeen Markov regiiminvaihtomallia hyödyntäen määritetään yksittäisten regiimientuottojakaumien ominaisuudet sekä regiimien välinen transitiomatriisi. Tulokset regiimien lukumäärän osalta osoittavat, että energiafutuurien päiväkohtaisten tuottojen aikasarjoissa regiimien lukumäärä vaihtelee kolmen ja kuuden välillä. Viikko- ja kuukausituottojen kohdalla kaikkien energiafutuurien prosesseissa regiimien lukumäärä on kaksi. Kun regiimejä on enemmän kuin kaksi, on prosessilla taipumus muodostaa regiimeistä koostuvia ryhmiä. Prosessi pysyy ryhmän sisällä yleensä pitkään, koska todennäköisyys siirtyä ryhmään kuuluvien regiimien välillä on suuri. Yksittäiset regiimit ryhmän sisällä eivät kuitenkaan ole kovin pysyviä. Näin ollen prosessi vaihtelee ryhmän sisäisten regiimien välillä tiuhaan. Regiimit, jotka eivät kuulu ryhmään, ovat yleensä pysyviä, mutta prosessi ajautuu niihin vain harvoin, sillä todennäköisyys siirtyä muista regiimeistä niihin on pieni. Tutkimuksen tulokset osoittavat myös, että prosesseissa, joita ohjaa kaksi regiimiä, nämä regiimit eivät välttämättä ole pysyvät bull- ja bear-markkinatilanteet. Tulokset osoittavat sen sijaan, että bear-markkinatilanne on energiafutuureissa selvästi vähemmän pysyvä.

TAKING ADVANTAGE OF THE LOCAL ADVANTAGE? - Investment value of the analyst local advantage in the Finnish stock market in 2006–2014

An investor can either conduct independent analysis or rely on the analyses of others. Stock analysts provide markets with expectations regarding particular securities. However, analysts have different capabilities and resources, of which investors are seldom cognizant. The local advantage refers to the advantage stemming from cultural or geographical proximity to securities analyzed. The research has confirmed that local agents are generally more accurate or produce excess returns. This thesis tests the investment value of the local advantage regarding Finnish stocks via target price data. The empirical section investigates the local advantage from several aspects. It is discovered that local analysts were more focused on certain sectors generally located close to consumer markets. Market reactions to target price revisions were generally insignificant with the exception to local positive target prices. Both local and foreign target prices were overly optimistic and exhibited signs of herding. Neither group could be identified as a leader or follower of new information. Additionally, foreign price change expectations were more in line with the quantitative models and ideas such as beta or return mean reversion. The locals were more accurate than foreign analysts in 5 out of 9 sectors and vice versa in one. These sectors were somewhat in line with coverage decisions and buttressed the idea of local advantage stemming from proximity to markets, not to headquarters. The accuracy advantage was dependent on sample years and on the measure used. Local analysts ranked magnitudes of price changes more accurately in optimistic and foreign analysts in pessimistic target prices. Directional accuracy of both groups was under 50% and target prices held no linear predictive power. Investment value of target prices were tested by forming mean-variance efficient portfolios. Parallel to differing accuracies in the levels of expectations foreign portfolio performed better when short sales were allowed and local better when disallowed. Both local and non-local portfolios performed worse than a passive index fund, albeit not statistically significantly. This was in line with previously reported low overall accuracy and different accuracy profiles. Refraining from estimating individual stock returns altogether produced statistically significantly higher Sharpe ratios compared to local or foreign portfolios. The proposed method of testing the investment value of target prices of different groups suffered from some inconsistencies. Nevertheless, these results are of interest to investors seeking the advice of security analysts.

POLITICAL ENVIRONMENT AND BUSINESS DEVELOPMENT IN THE ARCTIC Strategic opportunities and threats for Finnish companies

The Arctic environment is changing constantly. There are several factors that constitute to the rate and immensity of the development. The region differs from the surrounding markets that most of the countries in the region have been used to. Therefore the purpose of the study was to understand how the political environment affects Finnish companies’ strategies and business operations. The issues analyzed were the political environment in the region, the business environment and economic development, and the opportunities and threats that the Finnish companies have in Arctic. The main theories were found from strategic management and market analysis tools. The different theories and definitions were gone through in order to understand the context of the study. This is a qualitative study that uses content analysis as its main method of analyzing the data. Therefore the data analyzed was gathered from already existing material and it was analyzed until the saturation point was found. This was done in order to minimize the risks related to using secondary data. The data collected was then categorized into themes accordingly. First the general political environment in the Arctic was studied, especially the Arctic Council and its work as the main political entity. From there the focus shifted to the business environment and the general opportunities and threats that are found from Arctic economic development. China offered another point of view to this as it represented a non-Arctic state with a keen interest on the region. Lastly the two previous objectives were combined and looked through from a Finnish perspective. Finnish companies have a great starting point to Arctic business and the operational business environment gives them the framework with which they have to operate in. As a conclusion it can be said that there are three main factors leading the Arctic economic development; the climate change, the development of technology, and the political environment. These set the framework with which the companies operating in the region must comply with. The industry that is likely to lead the development is the marine industry. Furthermore it became evident that the Finnish companies operating in the Arctic face many opportunities as well as threats which can be utilized, taken advantage of or controlled through effective strategic management. The key characteristics needed in the region are openness and understanding of the challenging environment and the ability to face and manage the arising challenges.