Animal Spirits in Financial Markets: Agent-Based Model

In this work an agent based model (ABM) was proposed using the main idea from the Jabłonska-Capasso-Morale (JCM) model and maximized greediness concept. Using a multi-agents simulator, the power of the ABM was assessed by using the historical prices of silver metal dating from the 01.03.2000 to 01.03.2013. The model results, analysed in two different situations, with and without maximized greediness, have proven that the ABM is capable of explaining the silver price dynamics even in utmost events. The ABM without maximal greediness explained the prices with more irrationalities whereas the ABM with maximal greediness tracked the price movements with more rational decisions. In the comparison test, the model without maximal greediness stood as the best to capture the silver market dynamics. Therefore, the proposed ABM confirms the suggested reasons for financial crises or markets failure. It reveals that an economic or financial collapse may be stimulated by irrational and rational decisions, yet irrationalities may dominate the market.

International Entrepreneurship in Bottom of the Pyramid Markets – Overcoming institutional constraints

Bottom of the pyramid (BoP) markets are an underserved market of approximately four billion people living on under $5 a day in four regional areas: Africa, Asia, Eastern Europe and Latin America. According to estimations, the BoP market forms a $5 trillion global consumer market. Despite the potential of BoP markets, companies have traditionally focused on serving the markets of developed countries and ignored the large customer group at the bottom of the pyramid. The BoP approach as first developed by Prahalad and Hart in 2002 has focused on multinational corporations (MNCs), which were thought of as the ones who should take responsibility in serving the customers at the bottom of the pyramid. This study challenges this proposition and gives evidence that also smaller international new ventures – entrepreneurial firms that are international from their birth, can be successful in BoP markets. BoP markets are characterized by a number of deficiencies in the institutional environment such as strong reliance on informal sector, lack of infrastructure and lack of skilled labor. The purpose of this study is to increase the understanding of international entrepreneurship in BoP markets by analyzing how international new ventures overcome institutional constraints in BoP markets and how institutional uncertainty can be exploited by solving institutional problems. The main objective is divided into four sub objectives. • To describe the opportunities and challenges BoP markets present • To analyze the internationalization of INVs to BoP markets • To examine what kinds of strategies international entrepreneurs use to overcome institutional constraints • To explore the opportunities institutional uncertainty offers for INVs Qualitative approach was used to conduct this study and multiple-case study was chosen as a research strategy in order to allow cross-case analysis. The empirical data was collected through four interviews with the companies Fuzu, Mifuko, Palmroth Consulting and Sibesonke. The results indicated that understanding of the wider institutional environment improves the survival prospects of INVs in BoP markets and that it is indeed possible to exploit institutional uncertainty by solving institutional problems. The main findings were that first-hand experience of the markets and grassroots levels of information are the best assets in internationalization to BoP markets. This study highlights that international entrepreneurs with limited resources can improve the lives of people at the BoP with their business operations and act as small-scale institutional entrepreneurs contributing to the development of the institutional environment of BoP markets.

Return and volatility linkages between the S&P 500 and emerging stock markets in Eastern Europe

The aim of this thesis is to research mean return spillovers as well as volatility spillovers from the S&P 500 stock index in the USA to selected stock markets in the emerging economies in Eastern Europe between 2002 and 2014. The sample period has been divided into smaller subsamples, which enables taking different market conditions as well as the unification of the World’s capital markets during the financial crisis into account. Bivariate VAR(1) models are used to analyze the mean return spillovers while the volatility linkages are analyzed through the use of bivariate BEKK-GARCH(1,1) models. The results show both constant volatility pooling within the S&P 500 as well as some statistically significant spillovers of both return and volatility from the S&P 500 to the Eastern European emerging stock markets. Moreover, some of the results indicate that the volatility spillovers have increased as time has passed, indicating unification of global stock markets.