The microstructure of the foreign exchange market:the determinants of bid-ask spreads in the foreign exchange market

The purpose of this thesis is to shed more light in the FX market microstructure by examining the determinants of bid-ask spread for three currencies pairs, the US dollar/Japanese yen, the British pound/US dollar and the Euro/US dollar in different time zones. I examine the commonality in liquidity with the elaboration of FX market microstructure variables in financial centres across the world (New York, London, Tokyo) based on the quotes of three exchange rate currency pairs over a ten-year period. I use GARCH (1,1) specifications, ICSS algorithm, and vector autoregression analysis to examine the effect of trading activity, exchange rate volatility and inventory holding costs on both quoted and relative spreads. ICSS algorithm results show that intraday spread series are much less volatile compared to the intraday exchange rate series as the number of change points obtained from ICSS algorithm is considerably lower. GARCH (1,1) estimation results of daily and intraday bid-ask spreads, show that the explanatory variables work better when I use higher frequency data (intraday results) however, their explanatory power is significantly lower compared to the results based on the daily sample. This suggests that although daily spreads and intraday spreads have some common determinants there are other factors that determine the behaviour of spreads at high frequencies. VAR results show that there are some differences in the behaviour of the variables at high frequencies compared to the results from the daily sample. A shock in the number of quote revisions has more effect on the spread when short term trading intervals are considered (intra-day) compared to its own shocks. When longer trading intervals are considered (daily) then the shocks in the spread have more effect on the future spread. In other words, trading activity is more informative about the future spread when intra-day trading is considered while past spread is more informative about the future spread when daily trading is considered

An empirical investigation of the effect of rights issue announcements on share returns and the determinants of abnormal returns on the Kuala Lumpur Stock Exchange

This thesis examines the effect of rights issue announcements on stock prices by companies listed on the Kuala Lumpur Stock Exchange (KLSE) between 1987 to 1996. The emphasis is to report whether the KLSE is semi strongly efficient with respect to the announcement of rights issues and to check whether the implications of corporate finance theories on the effect of an event can be supported in the context of an emerging market. Once the effect is established, potential determinants of abnormal returns identified by previous empirical work and corporate financial theory are analysed. By examining 70 companies making clean rights issue announcements, this thesis will hopefully shed light on some important issues in long term corporate financing. Event study analysis is used to check on the efficiency of the Malaysian stock market; while cross-sectional regression analysis is executed to identify possible explanators of the rights issue announcements' effect. To ensure the results presented are not contaminated, econometric and statistical issues raised in both analyses have been taken into account. Given the small amount of empirical research conducted in this part of the world, the results of this study will hopefully be of use to investors, security analysts, corporate financial managements, regulators and policy makers as well as those who are interested in capital market based research of an emerging market. It is found that the Malaysian stock market is not semi strongly efficient since there exists a persistent non-zero abnormal return. This finding is not consistent with the hypothesis that security returns adjust rapidly to reflect new information. It may be possible that the result is influenced by the sample, consisting mainly of below average size companies which tend to be thinly traded. Nevertheless, these issues have been addressed. Another important issue which has emerged from the study is that there is some evidence to suggest that insider trading activity existed in this market. In addition to these findings, when the rights issue announcements' effect is compared to the implications of corporate finance theories in predicting the sign of abnormal returns, the signalling model, asymmetric information model, perfect substitution hypothesis and Scholes' information hypothesis cannot be supported.

Price synchronicity:the closing call auction and the London Stock Market

In this paper, we consider the impact of the introduction of a closing call auction on market quality of the London Stock Exchange. We employ the market model, RDD and MEC metrics of market quality. These signify substantial improvements to market quality at both the close and open for migrating stocks.We note that these improvements are larger at the open than the close. An important contribution of our paper is that we show that changes to market quality are stronger in those securities that have the lowest liquidity in the pre-call period. In contrast, market quality changes following the introduction of a closing call auction are approximately neutral for high-liquidity securities. We conclude that the implementation of a closing call auction, for high-liquidity securities may not enhance market quality.

Stress events in the Hungarian stock market

Central clearing and the role of central counterparties (CCP) has gained on importance in the financial sector, since counterparty risk of the trading is to be managed by them. The regulation has turned towards them lately, by defining several processes, how CCPs should measure and manage their risk. Stress situation is an important term of the regulation, however it is not specified clearly, how stress should be identified. This paper provides a possible definition of stress event based on the existing risk management methodology: the usage of risk measure oversteps, and investigates the potential stress periods of the last years on the Hungarian stock market. According to the results the definition needs further calibration based on the magnitude of the cross-sectional data. The paper examines furthermore whether stress is to be predicted from market liquidity. The connection of liquidity and market turmoil proved to be contrary to the expectations; liquidity shortage was rather a consequence, than a forecaster phenomenon in the tested period.

High spatial resolution land use and land cover mapping of the Brazilian Legal Amazon in 2008 using Landsat-5/TM and MODIS data.

Understanding spatial patterns of land use and land cover is essential for studies addressing biodiversity, climate change and environmental modeling as well as for the design and monitoring of land use policies. The aim of this study was to create a detailed map of land use land cover of the deforested areas of the Brazilian Legal Amazon up to 2008. Deforestation data from and uses were mapped with Landsat-5/TM images analysed with techniques, such as linear spectral mixture model, threshold slicing and visual interpretation, aided by temporal information extracted from NDVI MODIS time series. The result is a high spatial resolution of land use and land cover map of the entire Brazilian Legal Amazon for the year 2008 and corresponding calculation of area occupied by different land use classes. The results showed that the four classes of Pasture covered 62% of the deforested areas of the Brazilian Legal Amazon, followed by Secondary Vegetation with 21%. The area occupied by Annual Agriculture covered less than 5% of deforested areas; the remaining areas were distributed among six other land use classes. The maps generated from this project ? called TerraClass - are available at INPE?s web site (http://www.inpe.br/cra/projetos_pesquisas/terraclass2008.php)

Three essays on the intraday dynamics of the foreign exchange market

Containing three essays on the intraday dynamics of the foreign exchange market, the dissertation highlights the role of higher-moments in improving the forecasting ability of exchange rates models while contributing to the literature through the identification of new calendar anomalies in the currency market which has implications for regulators and investors.

Competitiveness factors : a study of the real estate market in China

The execution of 'macro-adjustment' policies by the central government to cool down the overheated real estate market in the past few years has created an unfavourable operating environment for real estate developers in Mainland China. Developers need to rethink their business model and create a new form of competitive advantage in order to survive. Despite this, research into the factors that influence the competitiveness of the real estate market in China has been limited. Therefore, a survey of 58 real estate actitioners, experts and academics in China was conducted to probe opinion on the factors that influence competitiveness in real estate firms in China. Survey results suggest that the developer's financial competency, market coverage and management competencies are vital to its competitiveness. Findings also highlight the importance of industry ecognition/award, share in different types of property sales/development projects, profit after tax, growth rate of their securities price, and diversification of R&D in reflecting the competitiveness of real estate developers in China. The findings provide an insight into the factors that influence competitiveness in China's real estate market and also assist practitioners to formulate competitiveness improvement strategies.

Review of the design-build market in the People’s Republic of China

Design-build (DB) system has been demonstrated as an effective delivery method and been widely used overseas. However it does not receive the same popularity in the People’s Republic of China (PRC). This paper first conducts a literature review on advantages and disadvantages of DB in general; then it gives an overview of the PRC construction industry. There are ample evidences that the DB system will theoretically bring benefits to the PRC construction industry. After a thorough investigation of the current DB market, it can be concluded that the development of the DB system is still at its infancy stage. The barriers to entry have been finally identified, which relate to the legal restraints, negative owner attitude, and high requirement of DB projects. These barriers constitute obstacles to the development of DB system in the PRC. However, with rapid growth of construction industry, new requirements in modern construction projects, and strong promotion from governments, it is believed that the domestic DB market will have great potential in the near future.

Assessing the relationship between shire winter crop yield and seasonal variability of the MODIS NDVI and EVI images

Australian researchers have been developing robust yield estimation models, based mainly on the crop growth response to water availability during the crop season. However, knowledge of spatial distribution of yields within and across the production regions can be improved by the use of remote sensing techniques. Images of Moderate Resolution Imaging Spectroradiometer (MODIS) vegetation indices, available since 1999, have the potential to contribute to crop yield estimation. The objective of this study was to analyse the relationship between winter crop yields and the spectral information available in MODIS vegetation index images at the shire level. The study was carried out in the Jondaryan and Pittsworth shires, Queensland , Australia . Five years (2000 to 2004) of 250m resolution, 16-day composite of MODIS Normalized Difference Vegetation Index (NDVI) and Enhanced Vegetation Index (EVI) images were used during the winter crop season (April to November). Seasonal variability of the profiles of the vegetation index images for each crop season using different regions of interest (cropping mask) were displayed and analysed. Correlation analysis between wheat and barley yield data and MODIS image values were also conducted. The results showed high seasonal variability in the NDVI and EVI profiles, and the EVI values were consistently lower than those of the NDVI. The highest image values were observed in 2003 (in contrast to 2004), and were associated with rainfall amount and distribution. The seasonal variability of the profiles was similar in both shires, with minimum values in June and maximum values at the end of August. NDVI and EVI images showed sensitivity to seasonal variability of the vegetation and exhibited good association (e.g. r = 0.84, r = 0.77) with winter crop yields.

The Day of the Week Effect and Option Pricing - A Study of the German Option Market

The use of different time units in option pricing may lead to inconsistent estimates of time decay and spurious jumps in implied volatilities. Different time units in the pricing model leads to different implied volatilities although the option price itself is the same.The chosen time unit should make it necessary to adjust the volatility parameter only when there are some fundamental reasons for it and not due to wrong specifications of the model. This paper examined the effects of option pricing using different time hypotheses and empirically investigated which time frame the option markets in Germany employ over weekdays. The paper specifically tries to get a picture of how the market prices options. The results seem to verify that the German market behaves in a fashion that deviates from the most traditional time units in option pricing, calendar and trading days. The study also showed that the implied volatility of Thursdays was somewhat higher and thus differed from the pattern of other days of the week. Using a GARCH model to further investigate the effect showed that although a traditional tests, like the analysis of variance, indicated a negative return for Thursday during the same period as the implied volatilities used, this was not supported using a GARCH model.

Seasonal prediction of the Indian monsoon

Under the project `Seasonal Prediction of the Indian Monsoon' (SPIM), the prediction of Indian summer monsoon rainfall by five atmospheric general circulation models (AGCMs) during 1985-2004 was assessed. The project was a collaborative effort of the coordinators and scientists from the different modelling groups across the country. All the runs were made at the Centre for Development of Advanced Computing (CDAC) at Bangalore on the PARAM Padma supercomputing system. Two sets of simulations were made for this purpose. In the first set, the AGCMs were forced by the observed sea surface temperature (SST) for May-September during 1985-2004. In the second set, runs were made for 1987, 1988, 1994, 1997 and 2002 forced by SST which was obtained by assuming that the April anomalies persist during May-September. The results of the first set of runs show, as expected from earlier studies, that none of the models were able to simulate the correct sign of the anomaly of the Indian summer monsoon rainfall for all the years. However, among the five models, one simulated the correct sign in the largest number of years and the second model showed maximum skill in the simulation of the extremes (i.e. droughts or excess rainfall years). The first set of runs showed some common bias which could arise either from an excessive sensitivity of the models to El Nino Southern Oscillation (ENSO) or an inability of the models to simulate the link of the Indian monsoon rainfall to Equatorial Indian Ocean Oscillation (EQUINOO), or both. Analysis of the second set of runs showed that with a weaker ENSO forcing, some models could simulate the link with EQUINOO, suggesting that the errors in the monsoon simulations with observed SST by these models could be attributed to unrealistically high sensitivity to ENSO.

Seasonal Occurrence of the White Shark, Carcharodon carcharias, in Waters off the Florida West Coast, with Notes on its Life History

The white shark, Carcharodon carcharias, is considered rare in the Gulf of Mexico; however, recent longline captures coupled with historical landings information suggest that the species occurs seasonally (winter-spring) within this region. We examined a total of seven adult and juvenile white sharks (185-472 em total length) captured in waters off the west coast of Florida. Commercial longline fisheries were monitored for white sharks during all months (1981-94), but this species was captured only from January to April. All white sharks were captured in continental shelf waters from 37 to 222 km off the west coast of Florida when sea surface temperatures ranged from 18.7° to 21.6°C. Depths at capture locations ranged from 20 to 164 m. Fishing gear typically used in Gulf of Mexico offshore fisheries may not be effective at capturing this species, and the apparent rarity of white sharks in this area may be, in part, a function of gear bias.