Brazilian, Chinese, and Indian exports: is the regional market really a source of learning?

In some Latin American countries the exporting activity starts at a regional level, with producers only later venturing into more competitive markets. The implicit risk is that a country might never progress from the regional stage to a more global market. This article compares the experiences of Brazil, China and India. It is shown that Brazil relied on the regional market far more intensely than these Asian countries. There were clear gains accruing to China and India for having exploited more sophisticated markets from the very beginning of their export drive.

Liquidity Risk in the Finnish Stock Market

This study explores the pricing of liquidity risk and its effect on stock returns in the Finnish stock market. In addition to that, it investigates whether there is a trend in liquidity risk. Finally, it analyzes whether the two chosen liquidity measures provide different results. The data consists of all the common shares listed in the Finnish stock market during the period of 1/1997–7/2015. To examine whether liquidity risk affects stock returns in the Finnish stock market, this study utilizes a conditional version of liquidity-adjusted capital asset pricing model (LCAPM) by Acharya and Pedersen (2005). Two recently proposed illiquidity measures – PQS and AdjILLIQ – are used in the empirical estimation to see whether there are differences in the results between the measures. The time-varying conditional liquidity risks are estimated by using a multivariate DCC-GARCH model, while the pricing of the liquidity risk is conducted by applying fixed effect panel regression. The results imply that investors in the Finnish stock market are willing to pay a premium to hedge from wealth shocks and having liquid assets during the declined market liquidity. However, investors are not willing to pay a premium for stocks with higher returns during illiquid markets. The total annualized illiquidity premiums found in the Finnish stock market are 1.77% and 1.04%, based on the PQS and AdjILLIQ measures, respectively. The study also shows that liquidity risk does not exhibit decreasing trend, and investors should consider liquidity risk in their portfolio diversification in the Finnish stock market.

Price movement in the Brazilian land market (1994-2010): an analysis in the light of post-Keynesian theory

ABSTRACT The present study aims to evaluate crop, pasture and forest land prices in Brazil, between 1994 and 2010, in the light of Post-Keynesian theory. The results provide evidence that land, more than just a simple factor of production, must be conceived of as an economic asset. In fact, the price of rural land is determined not only by the expected profitability deriving from agricultural activities but also by the agents' expectations about its future appreciation and liquidity in an economic environment permeated with uncertainty. In this context, as an object of speculation, land has been particularly important as a store of value.

Institutional environment in North Korea: market structure and overcoming institutional voids

Tutkimus sai innoituksensa, kun tutkija huomasi tarpeen liiketaloudelliselle, ajantasaiselle ja realistiselle tutkimukselle Pohjois-Korean markkinoista, joka kuvailisi markkinoiden olemassaolevia ja puuttuvia rakenteita sekä tutkisi mahdollisuuksia ylittää puuttuvat rakenteet. Institutionaalinen teoria valittiin sopivaksi viitekehykseksi kuvailla ja tutkia markkinarakennetta. Tutkimuskysymys muotoiltiin seuraavasti: “Miten ulkomaiset yritykset voivat reagoida puuttuviin markkinarakenteisiin Pohjois-Koreassa?”. Tutkimuskysymys jaettiin kolmeen osakysymykseen: (1) Millainen on Pohjois-Korean markkinoiden institutionaalinen ympäristö? (2) Mitkä ovat merkittävimmät puuttuvat markkinarakenteet Pohjois-Koreassa? (3) Mitä mahdollisuuksia ulkomaisilla yrityksillä voisi olla reagoida puuttuviin markkinarakenteisiin? Tutkimus toteutettiin kvalitatiivisena, koska tutkimuskysymys on deskriptiivinen. Aineisto kerättiin asiantuntijahaastattelun ja kvalitatiivisen sisällönanalyysin keinoin. Primääriaineiston muodostavat 2 asiantuntijahaastattelua ja sekundääriaineiston muodostavat 95 artikkelia, jotka kerättiin 40 lähteestä. Aineisto analysoitiin kvalitatiivisen sisällönanalyysin keinoin. Aineisto koodattiin, luokiteltiin ja esitettiin kokonaisuuksina luokittelurungon avulla, joka laadittiin tutkimusta varten muodostetun teoreettisen viitekehyksen mukaan. Tulokset ja johtopäätökset voidaan tiivistää seuraavasti. (1) Pohjois-Korean markkinan instituutioihin vaikuttaa kaksoisrakenne, jossa muodollinen, sosialistinen rakenne ja epämuodollinen, markkinalähtöinen rakenne toimivat päällekkäin. (2) Puuttuvia rakenteita on sekä markkinan kontekstissa että markkinatasolla. Puutteet ovat osittain seurausta vanhojen rakenteiden korvaantumisesta uusilla, jotka eivät ole institutionalisoituneet. (3) Yritykset voivat käyttää samoja mahdollisuuuksia reagoida puuttuviin markkinarakenteisiin Pohjois-Koreassa, joita kehittyvien markkinoiden yhteydessä on esitetty. Sen tulkittiin vähentävän käsitystä, jonka mukaan Pohjois-Korean markkina on liian erikoinen yritystoiminnalle. (4) Kasvava keskiluokka sekä yrittäjyyden ja naisten yhä merkittävämpi rooli liike-elämässä aiheuttavat alhaalta ylöspäin suuntautuvaa kehitystä markkinoilla. Nämä ovat merkkejä viimeaikaisesta kehityksestä, jotka eivät ole saaneet laajaa huomiota länsimaisessa mediassa. Se korostaa tarvetta liiketaloudelliselle, ajantasaiselle jatkotutkimukselle Pohjois-Korean markkinoista.

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.

A reaction engineering approach to homogeneously catalyzed glycerol hydrochlorination

The production of biodiesel through transesterification has created a surplus of glycerol on the international market. In few years, glycerol has become an inexpensive and abundant raw material, subject to numerous plausible valorisation strategies. Glycerol hydrochlorination stands out as an economically attractive alternative to the production of biobased epichlorohydrin, an important raw material for the manufacturing of epoxy resins and plasticizers. Glycerol hydrochlorination using gaseous hydrogen chloride (HCl) was studied from a reaction engineering viewpoint. Firstly, a more general and rigorous kinetic model was derived based on a consistent reaction mechanism proposed in the literature. The model was validated with experimental data reported in the literature as well as with new data of our own. Semi-batch experiments were conducted in which the influence of the stirring speed, HCl partial pressure, catalyst concentration and temperature were thoroughly analysed and discussed. Acetic acid was used as a homogeneous catalyst for the experiments. For the first time, it was demonstrated that the liquid-phase volume undergoes a significant increase due to the accumulation of HCl in the liquid phase. Novel and relevant features concerning hydrochlorination kinetics, HCl solubility and mass transfer were investigated. An extended reaction mechanism was proposed and a new kinetic model was derived. The model was tested with the experimental data by means of regression analysis, in which kinetic and mass transfer parameters were successfully estimated. A dimensionless number, called Catalyst Modulus, was proposed as a tool for corroborating the kinetic model. Reactive flash distillation experiments were conducted to check the commonly accepted hypothesis that removal of water should enhance the glycerol hydrochlorination kinetics. The performance of the reactive flash distillation experiments were compared to the semi-batch data previously obtained. An unforeseen effect was observed once the water was let to be stripped out from the liquid phase, exposing a strong correlation between the HCl liquid uptake and the presence of water in the system. Water has revealed to play an important role also in the HCl dissociation: as water was removed, the dissociation of HCl was diminished, which had a retarding effect on the reaction kinetics. In order to obtain a further insight on the influence of water on the hydrochlorination reaction, extra semi-batch experiments were conducted in which initial amounts of water and the desired product were added. This study revealed the possibility to use the desired product as an ideal “solvent” for the glycerol hydrochlorination process. A co-current bubble column was used to investigate the glycerol hydrochlorination process under continuous operation. The influence of liquid flow rate, gas flow rate, temperature and catalyst concentration on the glycerol conversion and product distribution was studied. The fluid dynamics of the system showed a remarkable behaviour, which was carefully investigated and described. Highspeed camera images and residence time distribution experiments were conducted to collect relevant information about the flow conditions inside the tube. A model based on the axial dispersion concept was proposed and confronted with the experimental data. The kinetic and solubility parameters estimated from the semi-batch experiments were successfully used in the description of mass transfer and fluid dynamics of the bubble column reactor. In light of the results brought by the present work, the glycerol hydrochlorination reaction mechanism has been finally clarified. It has been demonstrated that the reactive distillation technology may cause drawbacks to the glycerol hydrochlorination reaction rate under certain conditions. Furthermore, continuous reactor technology showed a high selectivity towards monochlorohydrins, whilst semibatch technology was demonstrated to be more efficient towards the production of dichlorohydrins. Based on the novel and revealing discoveries brought by the present work, many insightful suggestions are made towards the improvement of the production of αγ-dichlorohydrin on an industrial scale.

Institutional environment in North Korea: market structure and overcoming institutional voids

The research was sparked by an exchange in South Korea, as the author identified a gap in research that provides economic, up to date and realistic information about the North Korean market in English language. A need for a research was identified that would describe the market’s existing and missing market structures and explore possibilities to overcome the missing market structures. Institutional theory was chosen as a suitable framework to describe and explore the market. The research question was formulated as follows: “How can foreign companies overcome institutional voids in the North Korean market?”. To answer the research question, it was divided into three sub-questions as follows: (1) What is the institutional environment in North Korea like? (2) What are the major institutional voids in the North Korean market? (3) What possibilities do foreign companies have to overcome institutional voids? The research is qualitative by nature due to the descriptive and exploratory nature of the research question. Data collection consisted of expert interview and content analysis, resulting in primary data of two interviews and secondary data of 95 articles from 40 different sources. The data was analyzed with the systematical technique of content analysis. The data was coded, classified and presented as concepts with the help of a classification system that was build following the theoretical framework adapted for this study. The findings can be summarized as follows. (1) The market institutions are characterized by an overlapping dual system of formal, socialist structures and informal, market-oriented structures. (2) Institutional voids prevail on both the market’s contextual and on the market level. They are partly result of old institutions being replaced by new institutions that lack institutionalization. (3) Identified possibilities to overcome institutional voids correspond with possibilities drawn from previous research. This decreases the image of North Korea as an impossibly unique market to operate in. (4) Emerging middle class, rapidly growing entrepreneurial activities and women’s increasing role in business drive a down-to-up change in the market. This signals the recent development of the market, yet has been overlooked in the Western media. Thus there is a need for further economic, up to date research concerning North Korea.

Optimal Recycling Combination of Ash in South-East Finland

The present world energy production is heavily relying on the combustion of solid fuels like coals, peat, biomass, municipal solid waste, whereas the share of renewable fuels is anticipated to increase in the future to mitigate climate change. In Finland, peat and wood are widely used for energy production. In any case, the combustion of solid fuels results in generation of several types of thermal conversion residues, such as bottom ash, fly ash, and boiler slag. The predominant residue type is determined by the incineration technology applied, while its composition is primarily relevant to the composition of fuels combusted. An extensive research has been conducted on technical suitability of ash for multiple recycling methods. Most of attention was drawn to the recycling of the coal combustion residues, as coal is the primary solid fuel consumed globally. The recycling methods of coal residues include utilization in a cement industry, in concrete manufacturing, and mine backfilling, to name few. Biomass combustion residues were also studied to some extent with forest fertilization, road construction, and road stabilization being the predominant utilization options. Lastly, residues form municipal solid waste incineration attracted more attention recently following the growing number of waste incineration plants globally. The recycling methods of waste incineration residues are the most limited due to its hazardous nature and varying composition, and include, among others, landfill construction, road construction, mine backfilling. In the study, environmental and economic aspects of multiple recycling options of thermal conversion residues generated within a case-study area were studied. The case-study area was South-East Finland. The environmental analysis was performed using an internationally recognized methodology — life cycle assessment. Economic assessment was conducted applying a widely used methodology — cost-benefit analysis. Finally, the results of the analyses were combined to enable easier comparison of the recycling methods. The recycling methods included the use of ash in forest fertilization, road construction, road stabilization, and landfill construction. Ash landfilling was set as a baseline scenario. Quantitative data about the amounts of ash generated and its composition was obtained from companies, their environmental reports, technical reports and other previously published literature. Overall, the amount of ash in the case-study area was 101 700 t. However, the data about 58 400 t of fly ash and 35 100 t of bottom ash and boiler slag were included in the study due to lack of data about leaching of heavy metals in some cases. The recycling methods were modelled according to the scientific studies published previously. Overall, the results of the study indicated that ash utilization for fertilization and neutralization of 17 600 ha of forest was the most economically beneficial method, which resulted in the net present value increase by 58% compared to ash landfilling. Regarding the environmental impact, the use of ash in the construction of 11 km of roads was the most attractive method with decreased environmental impact of 13% compared to ash landfilling. The least preferred method was the use of ash for landfill construction since it only enabled 11% increase of net present value, while inducing additional 1% of negative impact on the environment. Therefore, a following recycling route was proposed in the study. Where possible and legally acceptable, recycle fly and bottom ash for forest fertilization, which has strictest requirements out of all studied methods. If the quality of fly ash is not suitable for forest fertilization, then it should be utilized, first, in paved road construction, second, in road stabilization. Bottom ash not suitable for forest fertilization, as well as boiler slag, should be used in landfill construction. Landfilling should only be practiced when recycling by either of the methods is not possible due to legal requirements or there is not enough demand on the market. Current demand on ash and possible changes in the future were assessed in the study. Currently, the area of forest fertilized in the case-study are is only 451 ha, whereas about 17 600 ha of forest could be fertilized with ash generated in the region. Provided that the average forest fertilizing values in Finland are higher and the area treated with fellings is about 40 000 ha, the amount of ash utilized in forest fertilization could be increased. Regarding road construction, no new projects launched by the Center of Economic Development, Transport and the Environment in the case-study area were identified. A potential application can be found in the construction of private roads. However, no centralized data about such projects is available. The use of ash in stabilization of forest roads is not expected to increased in the future with a current downwards trend in the length of forest roads built. Finally, the use of ash in landfill construction is not a promising option due to the reducing number of landfills in operation in Finland.

Pairs trading profitability in the Finnish stock market: A comparison between three methods

Pairs trading is an algorithmic trading strategy that is based on the historical co-movement of two separate assets and trades are executed on the basis of degree of relative mispricing. The purpose of this study is to explore one new and alternative copula-based method for pairs trading. The objective is to find out whether the copula method generates more trading opportunities and higher profits than the more traditional distance and cointegration methods applied extensively in previous empirical studies. Methods are compared by selecting top five pairs from stocks of the large and medium-sized companies in the Finnish stock market. The research period includes years 2006-2015. All the methods are proven to be profitable and the Finnish stock market suitable for pairs trading. However, copula method doesn’t generate more trading opportunities or higher profits than the other methods. It seems that the limitations of the more traditional methods are not too restrictive for this particular sample data.

Solutions to water problems in the bottom of the pyramid market

Solving the water crisis in the developing world is a critical issue. Four billion people in the globe, so called the Base of the Pyramid (BoP) population suffer from inadequate access to safe drinking water, while millions die daily from waterborne diseases and lack of clean water. The BoP people desperately need to obtain a satisfactory access to safe water sources. In order to address the issue, this research has been carried out. To provide holistic consideration to the matter, comprehensive exploration of various causes of the water crisis and its impacts in developing countries were discussed. Then, various viable and relevant solutions to the problem have been thoroughly scrutinized, including scientific, rational, practical and speculative approaches, examination of existing methods, technologies and products at the BoP water market. The role of clean water to the sustainable development was specifically featured. The paper also has studied social and economic factors, actors and circumstances which affect the market development of clean water technologies in the BoP. Possibilities and potentials of successful business between foreign water enterprises and BoP consumers were considered, while primary obstacles are deliberated on, with suggestion of the ways to tackle them. Technologies and products which are needed by the poor must be affordable, sustainable and of an appropriate quality. The crucial question of technology transfer was soundly discussed with pointing out main hindrances on the way of its implementation between the developed and developing world. The means to overcome these barriers were properly observed as well. To explore to some extent the possibility and feasibility of technology transfer from Finland to the BoP sector, 3 case study analyses have been implemented. Personal discussions in form of interviews were conducted at Kemira, Outotec and Fenno Water, Finnish water treatment and supply enterprises. The results of the interviews shed light on the specific practical matters, actual obstacles and potential solutions of the technology transfer from Finland to low-income countries.

SME Growth Strategy - Exploring New Market Segments

Tämän tutkimuksen tarkoituksena oli tunnistaa uusia markkinoita ja markkinasegmenttejä yrityksen kasvustrategiaa varten. Yritys on kasvanut erittäin voimakkaasti viime vuosina nykyisillä markkinoillaan ja haluaa nyt jatkaa kasvuaan uusilla markkinoilla. Työ koostuu kirjallisuuskatsauksesta ja empiirisestä osuudesta. Kirjallisuuskatsauksessa on tunnistettu useita pk-yrityksen kasvuun vaikuttavia tekijöitä, uusien markkinoiden kartoittamiseen ja arvioimiseen vaikuttavia tekijöitä, ja lisäksi liiketoimintastrategiaan ja markkinasegmentin valintaan vaikuttavia tekijöitä. Empiirisen osuuden data kerättiin 60 asiantuntijahaastattelusta, joilla kartoitettiin kokonaismarkkinoita ja saatiin tarkkaa markkinainformaatiota kohdemarkkinoista. Tutkimuksessa tunnistettiin kymmenen potentiaalista toimialaa ja 54 potentiaalista markkinasegmenttiä. Kirjallisuudesta tunnistetuilla kriteereillä, teknologisin perustein ja yrityksen omien näkökulmien perusteella näistä valittiin kohdemarkkinoiksi kahdeksan. Tutkimuksessa kehitettiin markkinasegmenttien arviointiin malli. Mallin avulla valitut kahdeksan markkinasegmenttiä listattiin järjestykseen niiden houkuttelevuuden perusteella. Jatkotoimenpiteenä yrityksessä tullaan kehittämään kasvustrategia perustuen tutkimuksen tuloksille.

Consumer Behavior in Mortgage Market: Evidence from Russia

The purpose of this master thesis is to identify behavioral patterns of potential borrower in mortgage market in crisis conditions and to link mortgage products available on Russian market with potential borrowers segments in dependence of detected patterns. Empirical results achieved through 172 answers of potential borrowers allowed to classify them in four groups in dependence of respondent perceptions about mortgage and future. On the basis of literature review and currently state of Russian mortgage market particular mortgage products were suggested to each of four clusters of potential borrowers. Then, recommendations for Russian banks how to apply received results were developed. Current master thesis has strong both academic and managerial contributions. It it adds significant value to existing consumer behavior studies; and provides practical recommendations for Russian banks how to understand mortgage borrower behavior in order to increase trust to mortgage among population.

Stock market reactions to changes in the FTSE SmallCap and S&P/TSX SmallCap indices

Stocks added to (deleted from) the Russell 2000 and the S&P 600 indexes experience positive (negative) abnormal returns following the announcement. However, researchers disagree on whether these abnormal returns are permanent or temporary and offer competing explanations. I address this controversy by examining market reactions for firms that are added to or deleted from the FTSE Small Cap index (the main testing sample) and the S&P/TSX SmallCap index (the comparison sample). For the main testing sample, all stocks except pure additions, experience a permanent price change that is accompanied by a permanent change in liquidity. However, for the comparison sample, abnormal returns over the announcement period fully reverted within 30 days. In further examination of stock liquidity for the main testing sample, sample stocks experience permanent change in liquidity. Taken together, the observed results support the price pressure and liquidity hypotheses.