A myriad of factors compels institutional investor participation in the stock markets. Several studies by researchers indicate that institutional trading activities improve stock market efficiency in ...a stock market anomaly (Shu, 2013; Urquhart & McGroarty, 2014). This quantitative, non-experimental, correlation study measures and evaluates financial institutional trading activity or trading volume and its relationship with specified corporate events such as quarterly earnings (QE) and quarterly dividends (QD). The researcher posed the research questions to include the relationship between financial institutional trading volume/ trading activities (FITV/FITA) and quarterly earnings (QE), and quarterly dividends (QD) as it relates to consistent trading and investment decisions. It measures and evaluates institutional managers' trading volume and activities of United States' midcap stocks between 2006 and 2016. The study employed Lo's Adaptive Markets Hypothesis (AMH) for its suitability in explaining how market participants adapt to changing market situations. The population is a comprehensive list of 37,444 institutional investment managers and a random sample of 100 ranging from banks to mutual funds. The linear mixed regression modeling was used to statistically fit, measure and test the relationships between the variables. The models independently measured changes in company earnings per share, dividends per share, binary variables indicating increases or decreases in company EPS, and binary variables indicating increases or decreases in company dividends per share. The results indicated that no independent variable had a statistically significant effect on the number of shares held by financial institutions. While both null hypotheses failed to be rejected, the alternative hypotheses were rejected instead. The study suggests new directions for research using different periods, types of stocks, such as growth, established, small-cap and preferred stocks, and how institutional portfolios change over time.
Poor hedge fund performance can impede the financial performance of a business organization. Despite the success of hedge funds, they incurred a loss of 33% during the global economic recession of ...2007-2009. Understanding volatility and risk exposures are vital for investors and managers to increase hedge fund returns in various market conditions. Grounded in Markowitz’s modern portfolio theory, the purpose of this quantitative correlational study was to examine the relationship between hedge fund risk exposure, volatility forecasting, and financial performance. Data were collected from archival data from the HedgeNews Africa database and financial databases in South Africa between 2007 and 2020. The results of the multiple linear regression analysis indicated the model was able to predict the financial performance of hedge funds significantly, F(2, 149) = 238, p < 0.001, R2 = .950, with risk exposure (3 month-credit spread), (β = -0.789, t = -9.417, p < 0.001), accounting for the highest contribution to the model. Volatility forecasting did not explain any significant variance in the financial performance of hedge funds. A key recommendation for hedge fund managers is to include risk exposure to maximize financial performance. The implications for positive social change include the potential for maximum profits in turbulent market conditions for institutional and individual investors, which could be applied to provide social amenities for communities and improve the welfare of people.
In the chapters that follow, I present three empirical studies in which I utilize natural experiments in combination with a consideration of institutional frictions to analyze topics related to ...macro-finance and political economy. The three chapters touch on a disparate array of topics, united by a few common threads. In each study I seek to make a case for causal identification via the quasi-random assignment of some economic variable. In addition, each study explores some feature of the political or regulatory environment, and uses policy frictions as tools for generating this exogenous variation. Two of my studies touch on topics broadly related to macro-finance. In these first two chapters, I utilize frictions introduced by economic regulations to study monetary policy and financial stability. In my final chapter, I take interest in the political process itself, and the incentives that it creates for political actors who award contracts to firms, and grants to state and local governments. In my first chapter, I study online-based “fintech” lenders in residential mortgage markets and I explore how their development of new technology has affected the transmission of monetary policy. I hypothesize that the proliferation of fintech lenders over the last decade has made it easier for borrowers to refinance their mortgages, particularly during periods of monetary easing, when interest rates are falling and borrowers have the strongest refinance incentives. For identification, I make use of the fact that the certification of non-bank lenders in the United States takes place at the state level, and I show that as new fintech firms entered the market and began to expand in the early 2010’s, they gravitated toward states with the least restrictive requirements for licensing new non-bank lenders. I compare mortgage refinancing behavior across neighboring states with different levels of regulatory strictness and show that states with faster fintech entry saw stronger mortgage refinancing. I present additional evidence suggesting that stronger refinancing, amidst falling interest rates, allows for stronger consumption in counties with a substantial fintech presence. I show that this amplification of stimulative interest rate policy is strongest in counties that are underserved by the traditional banking system. In my second chapter, I study so-called “credit booms.” Prior literature has shown an empirical relationship between rapid credit growth (relative to GDP) and a number of adverse economic outcomes. In order to isolate exogenous variation in credit growth, I study a set of policies called “credit ceilings” across an international panel of countries. Credit ceilings were implemented in these countries in the years after WWII and restricted the rate at which banks could extend new loans. As these countries modernized their monetary policies, they removed these credit ceilings. I show that aggregate credit grows sharply after these ceilings are removed, and I use ceiling removals as an instrument for credit growth in a linear-projections with instrumental variables (LPIV) setting to study the effects of credit growth on a number of macroeconomic and financial outcomes. I find that rapid credit growth is often accompanied by GDP and asset price growth in the short-run with sharp reversals in the medium-run, and often financial crises. In my final chapter, I shift to a political economy setting, and again analyze incentives that underlie government policies. I ask whether the Electoral College system for conducting presidential elections in the United States creates incentives for policymakers to shift government funds to politically important regions of the country. I analyze federal government expenditures awarded to firms, local governments, and other agencies and assess whether government funds are disproportionately directed either toward politically important battleground states, or to states that strongly support the sitting president’s political party. My approach centers on comparisons of spending in counties located next to one another on opposite sides of adjacent state borders. Using this approach, I find evidence suggesting that states which strongly support the winning candidate in an election receive more funding than states which voted for the losing candidate. I also find evidence suggesting that federal funds are directed toward politically important battleground states, particularly in an election year.
The majority of earnings forecasts issued by sell-side equity analysts conclude with a reiteration of the analyst’s existing earnings forecast for a firm. Yet, previous literature focuses on earnings ...forecast changes while ignoring earnings forecast reiterations. The first issue is that researchers assume that earnings forecast reiterations do not have information content and do not matter. Database limitation is the second primary issue for this kind of research. Using a large sample of earnings forecast reiteration data for S&P 100 firms during the 2006–2016 time period from Bloomberg, I investigate whether earnings forecast reiterations are informative. I find that reiterations are associated with smaller earnings forecast errors. I also find that reiterations are associated with positive stock market reactions. When more analysts give reiterations, there is no post-earnings-announcement-drift (PEAD). My results show that analyst earnings forecast reiterations are informative and investors listen and pay attention when analysts reiterate earnings forecasts.In this study, I compare the performance between self-disclosure analysts and non-self-disclosure analysts using Bloomberg analyst earnings forecast data from 2006 to 2016. I find that, even though non-self-disclosure analysts outperform self-disclosure analysts in earnings forecast accuracy, investors do not realize this performance difference, causing more non-self-disclosure analysts to publicize themselves. This finding is consistent with the Bloomberg analyst display structural change on 06/04/2018.
Επίκεντρο της παρούσας εργασίας είναι η προώθηση της βιώσιμης ανάπτυξης από τις υπεύθυνες τράπεζες.Στόχο της αποτελεί η απάντηση στο ερώτημα κατά πόσο συμβάλλουν οι τράπεζες με τη χρηματοδότησή τους ...και με άλλα μέσα στην επίτευξη των στόχων της βιώσιμης ανάπτυξης.Αφού εξηγήσουμε τις έννοιες της Υπεύθυνης Τραπεζικής, της Βιώσιμης Τραπεζικής και της Βιώσιμης Ανάπτυξης θα αναλύσουμε πώς συνδέονται μεταξύ τους.Θα μελετήσουμε ακόμη ερευνητικά τη συμβολή των τεσσάρων συστημικών τραπεζών, που έχουν προσυπογράψει τις αρχές της Υπεύθυνης Τραπεζικής, στη βιώσιμη ανάπτυξη της Ελλάδας τα τελευταία χρόνια και θα δούμε ότι το αποτέλεσμα είναι μεν θετικό αλλά πενιχρό, σε συστοιχία με τα αποτελέσματα άλλων μελετών για την επίδραση των ευρωπαϊκών τραπεζών.
In the first chapter, with lab experiments, Shah, Shafir, and Mullainathan (2015) conjecture that resource scarcity could lead consumers to deviate from heuristics and become less susceptible to ...decision biases. Reversely, I test if observed behavioral biases can help identify financially constrained borrowers. Taking advantage of a rich data set from the world's largest peer-to-peer FinTech consumer lending platform, I empirically test this hypothesis in a real world field setting by examining the relationship between the deviation from the heuristics of choosing a round-number loan and financial constraints. Controlling for all borrower and loan characteristics, I robustly find that borrowers who deviate are 2 percentage points more likely to default (more financially constrained) than conformists who choose round-number loans. Separating lenders by type, I find that institutional lenders do largely mitigate this extra default risk through their screening process, whereas the cost of this mispricing is transferred mostly to retail investors. In the second chapter, we study a standard machine learning algorithm (Taddy, 2013) to measure sentiment in financial documents. Our empirical approach relies on stock price reactions to color words, providing as output dictionaries of positive and negative words. In head-to-head comparisons, our dictionaries outperform the standard bag-of-words approach (Loughran and McDonald, 2011) when predicting stock price movements out-of-sample. By comparing their composition, word-by-word, our method refines and expands the sentiment dictionaries in the literature. The breadth of our dictionaries and their ability to disambiguate words using bigrams both help to color finance discourse better. In the third chapter, we develop a testable model to evaluate the concern that illiquidity in corporate bonds may generate a first-mover advantage among bond fund investors. A key insight of the model is that first-movers, if present in bond funds, must impose non-trivial costs on non-redeeming investors. We use estimates from a structural VAR applied to daily data spanning five periods of turbulent bond markets to calculate the "cost of remaining invested'' (CRI), in terms of reduced returns, on days when the market drops. We find little evidence of an economically meaningful incentive for first-movers to redeem. In aggregate, CRI is typically very small, less than 4 basis points on an annualized basis, even for funds that hold less liquid bonds. Our hypothesis test for the presence of first-movers in individual funds signals that, for a subset of high yield bond funds, the elasticity of fund flows to market returns is higher than would be expected by chance alone. However, the assets in these funds are too small to impose meaningful price pressure on the high yield bond market.
Bad actors are known to target participants in capital markets because the possibilities for stealing money are endless. Understanding the effectiveness of financial crime enforcement and the ...potential ways to improve is essential to maintain market integrity. This paper summarizes financial crime enforcement in capital markets and the developing landscape and challenges facing financial crime detection and enforcement. The added focus was on fraud in asset management, retail investor abuse, and digital asset spaces. Ancillary objectives were to identify meaningful opportunities for improved scale efficiency and challenges faced by regulators and financial institutions. The key findings state that although financial crime regulation in capital markets has grown, as of late, more enforcement is needed. This study also finds that communication and data sharing are inconsistent; however, the collaboration and standardization of shared information between domestic and international regulatory bodies and financial institutions will continue to be enhanced. Digital assets require attention, as this sector presents a significant risk due to the substantial losses that can affect investors. Future research should focus on how agencies can develop more proactive interfacing protocols, improving working together to regulate asset managers and international digital asset exchanges more effectively. Keywords: Financial Crime and Compliance Management, Professor Carmen Mercado, Securities, Cryptocurrency, FinCEN, FINRA, SEC.
The primary market of many US registered ETFs exhibits an oligopolistic structure, which is shown to have relevant implications for the pricing efficiency of those financial products. I show that the ...entry of an additional Authorized Participant (AP) corresponds to a decrease in the magnitude of ETF price deviations from Net Asset Value (NAV) of at least one basis point in ETFs with high primary market concentration. I build a dynamic equilibrium model of ETF primary market arbitrage that describes the trade-off faced by monopolistically competitive APs between waiting for mispricing to widen and pre-empting competitors from eliminating it. In the model, the creation unit size is shown to be an important friction driving the entry decision and, therefore, the magnitude of mispricing. Indeed, in the data, around one-third of all primary market transactions amount to one creation unit, suggesting that it is often a binding constraint. ETF split events and the creation unit size changes help to identify shocks to the dollar value of creation unit size empirically. I show that by cutting the creation unit size in half, mispricing decreases by almost two basis points, a magnitude consistent with that implied by my quantitative model.
This dissertation contains two essays in market microstructure and institutional asset management. The first essay studies a dynamic model of strategic trading where the parameters of temporary price ...impact (how price depends on a trader's current rate of trading) and permanent price impact (how price depends on the cumulative quantity traded over time) are endogenous and time-varying. A monopolistic informed speculator trades with oligopolistic uninformed speculators. They agree to disagree about the precision of the informed speculator's private Gaussian information flow. In the interval-trading Nash equilibrium with linear Markov strategies, trade starts if the disagreement is high enough and stops when the decaying alpha becomes insufficient to generate further trading benefits. Equilibrium permanent price impact parameters encapsulate the counteracting effects of descending residual uncertainty and diminishing trading opportunities. Equilibrium temporary price impact parameters capture traders' inter-temporal trade-offs between the benefits of learning and trading. The second essay was motivated by the observation that active institutional investors anticipate potential unwinding costs when accumulating positions. In this essay, I develop a dynamic model to study how strategic traders' accumulation and unwinding motives interact and evolve when facing a decaying profit opportunity. The unwinding pressures come from quadratic (regulatory) holding costs and price impacts of competitors' trades. The model shows that (i) with unwinding pressures, traders are reluctant to exploit persistent opportunities and profit most from those with an intermediate decaying rate; (ii) competition alleviates the unwinding pressure from holding costs but strengthens that from competitors' price impacts; and (iii) with increased regulatory costs, traders' most profitable opportunities shift to more transient ones.
Although small and medium enterprises (SMEs) contribute significantly to Nigeria’s socioeconomic and political development, most of the country’s SMEs no longer operate by their fifth anniversary. ...Many owners lack knowledge of the financial strategies required for the long-term performance and growth of their enterprise. The aim of this qualitative multiple case study was to gain an in-depth understanding of financial strategies that SMEs owner-managers can adopt to enhance the sustainability of their business operations in Nigeria. This study was grounded in entrepreneurship theory and Porter’s model of competitive strategy. Qualitative data from multiple sources, including semistructured interviews, scholarly works, and observational field notes, were collected. The participants were 15 SME owner-managers who employ fewer than 200 employees within the manufacturing, education, trading, agriculture, and accounting/consulting service sectors. Thematic analysis of data produced eight themes that explained the financial strategy practices of SME owner-managers: using available financing options, entrenching strategic financial practices, adopting effective long-term financial planning, acquiring basic financial and business knowledge, establishing a sound financial reporting system, embracing entrepreneurial resilience, negotiating challenges, and taking advantage of technology. The findings revealed the need for SME owner-managers to be dynamic in their financial strategy practices. By doing so, SME owner-managers may be able to sustain their businesses, which may promote positive social change through job creation, wealth distribution, technological innovation, grassroot development, and enhancement of gross domestic product.
