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.

Risk-return trade-off and autocorrelation

A trade-off between return and risk plays a central role in financial economics. The intertemporal capital asset pricing model (ICAPM) proposed by Merton (1973) provides a neoclassical theory for expected returns on risky assets. The model assumes that risk-averse investors (seeking to maximize their expected utility of lifetime consumption) demand compensation for bearing systematic market risk and the risk of unfavorable shifts in the investment opportunity set. Although the ICAPM postulates a positive relation between the conditional expected market return and its conditional variance, the empirical evidence on the sign of the risk-return trade-off is conflicting. In contrast, autocorrelation in stock returns is one of the most consistent and robust findings in empirical finance. While autocorrelation is often interpreted as a violation of market efficiency, it can also reflect factors such as market microstructure or time-varying risk premia. This doctoral thesis investigates a relation between the mixed risk-return trade-off results and autocorrelation in stock returns. The results suggest that, in the case of the US stock market, the relative contribution of the risk-return trade-off and autocorrelation in explaining the aggregate return fluctuates with volatility. This effect is then shown to be even more pronounced in the case of emerging stock markets. During high-volatility periods, expected returns can be described using rational (intertemporal) investors acting to maximize their expected utility. During lowvolatility periods, market-wide persistence in returns increases, leading to a failure of traditional equilibrium-model descriptions for expected returns. Consistent with this finding, traditional models yield conflicting evidence concerning the sign of the risk-return trade-off. The changing relevance of the risk-return trade-off and autocorrelation can be explained by heterogeneous agents or, more generally, by the inadequacy of the neoclassical view on asset pricing with unboundedly rational investors and perfect market efficiency. In the latter case, the empirical results imply that the neoclassical view is valid only under certain market conditions. This offers an economic explanation as to why it has been so difficult to detect a positive tradeoff between the conditional mean and variance of the aggregate stock return. The results highlight the importance, especially in the case of emerging stock markets, of noting both the risk-return trade-off and autocorrelation in applications that require estimates for expected returns.

Developing the Product Return Process of a Service Center With Lean Methods

Today lean-philosophy has gathered a lot of popularity and interest in many industries. This customer-oriented philosophy helps to understand customer’s value creation which can be used to improve efficiency. A comprehensive study of lean and lean-methods in service industry were created in this research. In theoretical part lean-philosophy is studied in different levels which will help to understand its diversity. To support lean, this research also presents basic concepts of process management. Lastly theoretical part presents a development model to support process development in systematical way. The empirical part of the study was performed by performing experimental measurements during the service center’s product return process and by analyzing this data. Measurements were used to map out factors that have a negative influence on the process flow. Several development propositions were discussed to remove these factors. Problems mainly occur due to challenges in controlling customers and due to the lack of responsibility and continuous improvement on operational level. Development propositions concern such factors as change in service center’s physical environment, standardization of work tasks and training. These factors will remove waste in the product return process and support the idea of continuous improvement.

Point Of No Return: Dope Sick Love and Reindeerspotting as Documentaries of Addiction

In this postgraduate thesis the focus is on two documentary films, Renaud Brothers's Dope Sick Love (2005) and Joonas Neuvonen's Reindeerspotting (2010). In both of these films, addicts are on limelight. The directors of both films follow addicts and their everyday lives on streets with handheld cameras. This thesis will analyze and compare the narratives of these addicts. Do these documentaries affirm to the existing conventions, according to which representations of addicts and addiction are always either miraculous survival stories or stories, which always end up in utter decadence. The main questions this thesis proposes, are how addicts and their narratives are being handled in the two case study films, and how the drug cultures depicted in the films differ from each other. What changes between New York City and Rovaniemi, Northern Finland, and what remains the same. The academic and theoretical framework of this thesis consists of Susanna Helke's doctoral thesis Nanookin jälki, where the history of documentary films' methods and approaches are discussed. Additionally, the thinking is heavily informed by such poststructuralist writers as Roland Barthes, Michel Foucault, Louis Althusser, Stuart Hall and Chris Weedon.

Hedge-rahastojen menestyksen pysyvyys ja suhteellinen suoriutuminen sijoittajan näkökulmasta

The purpose of the thesis is to examine the long-term performance persistence and relative performance of hedge funds during bear and bull market periods. Performance metrics applied for fund rankings are raw return, Sharpe ratio, mean variance ratio and strategy distinctiveness index calculated of the original and clustered data correspondingly. Four different length combinations for selection and holding periods are employed. The persistence is examined using decile and quartile portfolio formatting approach and on the basis of Sharpe ratio and SKASR as performance metrics. The relative performance persistence is examined by comparing hedge portfolio returns during varying stock market conditions. The data is gathered from a private database covering 10,789 hedge funds and time horizon is set from January 1990 to December 2012. The results of this thesis suggest that long-term performance persistence of the hedge funds exists. The degree of persistence also depends on the performance metrics employed and length combination of selection and holding periods. The best results of performance persistence were obtained in the decile portfolio analysis on the basis of Sharpe ratio rankings for combination of 12-month selection period and the holding period of equal length. The results also suggest that the best performance persistence occurs in the Event Driven and Multi strategies. Dummy regression analysis shows that a relationship between hedge funds and stock market returns exists. Based on the results, Dedicated Short Bias, Global Macro, Managed Futures and Other strategies perform well during bear market periods. The results also indicate that the Market Neutral strategy is not absolutely market neutral and the Event Driven strategy has the best performance among all hedge strategies.

Inhibition of return, gap effect and saccadic reaction time to a visual target

Simple manual reaction time (MRT) to a visual target (S2) is shortened when a non-informative cue (S1) is flashed at the S2 location shortly before the onset of S2 (early facilitation). Afterwards, MRT to S2 appearing at the S1 location is lengthened (inhibition of return - IOR). Similar results have been obtained for saccadic reaction time (SRT). Moreover, when there is a temporal gap between offset of the fixation point (FP) and onset of a target (gap paradigm), SRT is shorter than SRT in an overlap paradigm (FP remains on). In the present study, we determined SRT to S2 (10º) after presenting S1 at the same eccentricity (10º) or at a parafoveal position (2º) in the same or in the opposite hemifield. In addition, we employed both gap and overlap paradigms. Twelve subjects were asked not to respond to S1 (2º or 10º) to the right or to the left of FP, but to respond by making a saccadic movement in response to S2. We obtained the following results: 1) a 40-ms gap effect, 2) an interaction between gap effect and IOR, 3) a 39-ms delay (IOR) when S2 appeared at the cued (S1) position, and 4) a smaller (17 ms) but significant inhibition when S1 occurred at 2º in the ipsilateral hemifield. Thus, a parafoveal (2º) S1 elicits an inhibition of SRT towards ipsilateral peripheral targets. Since an inhibition of the ipsilateral hemifield by a 1º eccentric cue has been reported to occur when manual responses are employed, we suggest that the postulated functional link between covert and overt orienting of attention is also valid for parafoveal cues.

The Performance of European Small Cap Equity Funds

The thesis examines the risk-adjusted performance of European small cap equity funds between 2008 and 2013. The performance is measured using several measures including Sharpe ratio, Treynor ratio, Modigliani measure, Jensen alpha, 3-factor alpha and 4-factor alpha. The thesis also addresses the issue of persistence in mutual fund performance. Thirdly, the relationship between the activity of fund managers and fund performance is investigated. The managerial activity is measured using tracking error and R-squared obtained from a 4-factor asset pricing model. The issues are investigated using Spearman rank correlation test, cross-sectional regression analysis and ranked portfolio tests. Monthly return data was provided by Morningstar and consists of 88 mutual funds. Results show that small cap funds earn back a significant amount of their expenses, but on average loose to their benchmark index. The evidence of performance persistence over 12-month time period is weak. Managerial activity is shown to positively contribute to fund performance

Determinants of capital expenditures: Evidence from oil and mining sectors in Russia

This master’s thesis investigates the significant macroeconomic and firm level determinants of CAPEX in Russian oil and mining sectors. It also studies the Russian oil and mining sectors, its development, characteristics and current situation. The panel data methodology was implemented to identify the determinants of CAPEX in Russian oil and mining sectors and to test derived hypotheses. The core sample consists of annual financial data of 45 publicly listed Russian oil and mining sector companies. The timeframe of the thesis research is a six year period from 2007 to 2013. The findings of the master’s thesis have shown that Gross Sales, Return On Assets, Free Cash Flow and Long Term Debt are firm level performance variables along with Russian GDP, Export, Urals and the Reserve Fund are macroeconomic variables that determine the magnitude of new capital expenditures reported by publicly listed Russian oil and mining sector companies. These results are not controversial to the previous research paper, indeed they confirm them. Furthermore, the findings from the emerging countries, such as Malaysia, India and Portugal, are analogous to Russia. The empirical research is edifying and novel. Findings from this master’s thesis are highly valuable for the scientific community, especially, for researchers who investigate the determinant of CAPEX in developing countries. Moreover, the results can be utilized as a cogent argument, when companies and investors are doing strategic decisions, considering the Russian oil and mining sectors.