Segal Graduate School of Business Final Projects

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THE MARKET RETURNS' PREDICTABILITY OF GDP GROWTH – A CROSS-COUNTRY ANALYSIS

Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2019-12
Abstract: 

As the stock market is the barometer of the health of the economy and reflects the expectations of investors, it is recognized that the stock market return has a predictive power of future GDP growth.

In this paper, we examine the relation between GDP growth and stock market return within a country panel framework and analyze whether the following variables can improve the predictability of the market on future growth: 1. Rule of Law; 2. Government Effectiveness; 3. Market Capitalization; 4. Trade Openness. The analysis is done using a panel of 89 countries over the period 1989 to 2018 (30 years), which is a period of both rapid global development as well as that of the global financial crisis.

Our study indicates that political variables such as increased rule of law and greater government effectiveness increase the market return’s predictability of GDP growth. We logically conclude that the GDP growth of developed countries is better predicted by market return because developed countries' growth is less affected by government idiosyncratic intervention and corruption and are more affected by the information economy and world growth factors.

Document type: 
Graduating extended essay / Research project
File(s): 
Supervisor(s): 
Amir Rubin
Department: 
Beedie School of Business-Segal Graduate School

THE INFLUENCE OF OIL PRICE SHOCK ON THE CANADIAN STOCK MARKET

Author: 
Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2019-12
Abstract: 

This paper conducts an empirical study on the influence of international oil price volatility on the Canadian stock market. Additionally, it addresses the influences of oil price shock vary among stocks in different sectors and stocks with different size of the market value.

By using the SVAR model, we conduct model stationary test, lag period selection, impulse response analysis to give the empirical results. We conclude from the results that oil price shock has a positive impact on the overall stock market in Canada. Moreover, we find that the influence of oil price shock has the similar pattern on both stocks with large market value and small market value, but stocks with small market value are more responsive to the oil price shock. We also find the oil price shock had a major influence in the stock price on the energy sector in Canada, but the influence only lasted for one month according to our study. There was a non-negligible effect on the stock price in material sectors, and the influence lasted for four months. For other sectors, we do not find great influences.

Document type: 
Graduating extended essay / Research project
File(s): 
Supervisor(s): 
Dr. Andrey Pavlov
Department: 
Beedie School of Business-Segal Graduate School

THE IMPACT OF SPECULATION AND VACANCY TAX ON THE HOUSING PRICES IN VANCOUVER

Author: 
Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2019-12
Abstract: 

This paper studies the effect of British Columbia’s Speculation and Vacancy Tax (SVT) on Vancouver housing prices. We also reexamine other economic factors referring to the existing literature, such as the GDP of the real estate sector growth, the 10-year government of bond yield, the local unemployment rate and the local population growth.

We use difference-in-differences (DID) model to measure the effect of SVT policy. In the overall market of Vancouver, we cannot detect significant effect of the tax on housing prices. However, we detect an impact for the market segment we expect to be most affected by the tax— condos in Vancouver West. We find that British Columbia’s Speculation and Vacancy Tax has significantly negative influence on the prices of condos in Vancouver West in comparison with Toronto Central, where no similar tax is implemented.

Document type: 
Graduating extended essay / Research project
File(s): 
Supervisor(s): 
Dr. Andrey Pavlov
Department: 
Beedie School of Business-Segal Graduate School

THE FACTORS THAT AFFECT STOCK MARKET CO-MOVEMENTS ACROSS THE GLOBE

Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2019-12
Abstract: 

This paper attempts to explain the extent to which international stock market returns correlate with US stock market returns of the previous day. The purpose of this study is to confirm the expected positive correlation in co-movement between the US and non-US stock markets, and the extent to which this positive correlation is related to the time lag between the US market closing time (the previous day) and the non-US country’s opening time; as well as the type of legal system, the dominant language, and the state of development of the non-US country. The paper also attempts to explain how this relationship would hold in the case there is a weekend in between the close of the US stock market and the opening of the non-US stock market, and during the 2008 financial crisis. We find that US stock market returns are a significant predictor for non-US market returns on the following trading-day and that developed economies and countries with English as the dominant language are more highly correlated. Markets that are further away from the US and that have a common law legal system are inversely are less correlated than those that don’t. Additionally, we find that when there is a weekend between the US closing and non-US opening, the returns have a weaker correlation. Finally, during the 2008 financial crisis, developed economies were more highly correlated with US stock market returns on the previous trading-day than the others.

Document type: 
Graduating extended essay / Research project
File(s): 
Supervisor(s): 
Dr. Amir Rubin
Department: 
Beedie School of Business-Segal Graduate School

THE DETERMINANTS OF BANK PROFITABILITY: THE CASE OF U.S.

Author: 
Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2019-12
Abstract: 

This paper analyses the determinants of bank profitability, using a sample of U.S. bank holding companies from 2002 to 2018. We discuss the impact of overall economy on the banking system as well as major political events and legislative reform during the period. To investigate the determinants statistically, we perform a regression analysis to examine the influence of macroeconomic and bank specific factors on profitability. Furthermore, we separately examine the relationship for small, medium-sized, and large banks. We find that a higher percentage of capital, loans or deposits in total assets, more noninterest income and faster GDP growth lead to higher bank profitability. In contrast, bank size, unemployment rate and inflation are negatively associated with bank profitability.

Document type: 
Graduating extended essay / Research project
File(s): 
Supervisor(s): 
Jijun Niu
Department: 
Beedie School of Business-Segal Graduate School

SECTOR DIVERSIFICAITON AND ITS EFFECT ON RISK EXPOSURE OF CANADIAN REAL ESTATE INVESTMENT PORTFOLIO

Author: 
Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2019-12
Abstract: 

The objective of this project is to use sector diversification method to mitigate the downside risk of a Canadian real estate investment portfolio under Value-at-Risk measurement. During real estate bubble burst, Canadian real estate investors are unable to sell their assets due to the illiquid market condition.

In the first half of this paper, we attempt to set up an appropriate portfolio risk measure by applying GJR-GARCH model and t-copula methods, associated with Extreme Value Theory, which will improve model accuracy.

We discover that using 10% of the portfolio value to short Canadian commercial bank stocks can result in considerate VaR reduction. The research result provides a more affordable way for individual investors to hedge their risks in Canadian real estate market.

Document type: 
Graduating extended essay / Research project
File(s): 
Supervisor(s): 
Andrey Pavlov, Ph.D.
Department: 
Beedie School of Business-Segal Graduate School

RELATIONSHIP BETWEEN LOAN GROWTH AND BANK VALUATION

Author: 
Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2019-12
Abstract: 

This paper examines the relationship between loan growth and bank valuation. The sample consists of data on publicly traded banks in the US from 2004 to 2017. Using the whole sample, we find that faster loan growth is associated with higher bank valuations. Then, we divide the whole sample into three periods, and find that this result holds for every period. Finally, we divide the whole sample by both time periods and bank size. We find that, for the first two periods, faster loan growth is associated with higher valuations at small and medium banks, but not at large banks. For the last period, however, faster loan growth is associated with higher valuations at large banks, but not at small and medium banks. We discuss the possible explanations for our findings.

Document type: 
Graduating extended essay / Research project
File(s): 
Supervisor(s): 
Jijun Niu
Department: 
Beedie School of Business-Segal Graduate School

RELATIONSHIP BETWEEN ESG AND FINANCIAL PERFORMANCE OF PUBLICLY LISTED FIRMS ON THE S&P 500

Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2019-12
Abstract: 

This research paper examines the relation between the Environmental, Social and Governance (ESG) factors and the financial performance of the company. We have included the Return on Asset, Tobin’s Q, Earnings per Share, Weighted Average Cost of Capital, Market capitalization and the Free Cash Flow of the firms. We have considered a sample of around 400 companies listed on the US stock market.

After running a regression between the ESG Score and the other factors we found mixed results. We found a positive correlation between the Free cash flow, Earnings per Share and the Market Capitalization of the firm and a negative correlation between the Return on Asset, Tobin’s Q and the Weighted Average Cost of Capital of the firm.

Document type: 
Graduating extended essay / Research project
File(s): 
Supervisor(s): 
Carlos Da Costa
Department: 
Beedie School of Business-Segal Graduate School

PREDICTION OF CORPORATE DEFAULT USING LOGISTIC REGRESSION

Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2019-12
Abstract: 

The main aim of the research is to examine the importance of Merton's (1974) distance-to- default measure in predicting corporate defaults. The data sample includes 75,667 companies from 1975 to 2007. We compare the predictive power of Merton's distance-to- default to accounting variables used in Ohlson (1980), Altman (1968), and a set of market measures used in Campbell et al. (2008).

The marginal effect is used to evaluate the efficiency of the independent variables to forecast corporate defaults. The relative or receiver operating characteristic (ROC) curve is used to show the accuracy of the model. The findings show that Merton distance to default improves the efficiency of the model and has a high marginal effect among the independent variables, as shown in the paper.

Document type: 
Graduating extended essay / Research project
File(s): 
Supervisor(s): 
Dr. Deniz Anginer
Department: 
Beedie School of Business-Segal Graduate School

THE RELATION BETWEEN INVESTOR OWNERSHIP AND CORPORATES INVESTMENT, PAYOUTS, AND PROFITABILITY

Author: 
Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2019-12
Abstract: 

How corporate using their cash holding of public firms has been a more and more important factor for investors to observe investment opportunity in companies. Institutional investors have been a major role of corporate investing, and the institutional investors can benefit the firms’ performance and improve the efficiency by providing monitoring to the corporations’ governance (Boone and White, 2015). So, I hypothesize that the investors will affect the use of cash holdings, investment, payouts, and profitability by monitoring the managers, and the long-term investors may have more influence. In this article, I tried to examine the hypothesis through empirical study.

Document type: 
Graduating extended essay / Research project
File(s): 
Supervisor(s): 
Christina Atanasova
Department: 
Beedie School of Business-Segal Graduate School