Segal Graduate School of Business Final Projects

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Economic Policy Uncertainty and Bank Valuations

Author: 
Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2016-10
Abstract: 

This paper examines the relation between economic policy uncertainty and bank valuation.  We use financial data and stock data of U.S bank holding companies over the period of 2002-2015. We use Tobin’s Q as the dependent variable and economic policy uncertainty (EPU) index asindependent variable. We find that the results differ across banks of different size and over different time period. Before and after the financial crisis, a negative relationship is roughly held. However, during the crisis, the results are mixed. Notably, for small banks, the impacts from monetary policy and overall economic policy uncertainty become insignificant. For large and medium banks, the monetary policy uncertainty becomes positively related to bank valuation. And probably because of the cancel-out effect, the overall economic policy uncertainty turns out to be non-negatively associated with bank valuation. We think the results may be explained by “too big to fail” and “constant probability of disaster” theories.

Document type: 
Graduating extended essay / Research project
Senior supervisor: 
Jijun Niu
Department: 
Beedie School of Business - Segal Graduate School

Determinants of Profitability and the Impact of Diversification on Banks' Profitability in Canada

Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2016-10
Abstract: 

This paper seeks to investigate the determinants of banks’ profitability in Canada and the relationship between banks’ profitability and income diversification using a sample of 8 Canadian bank holding companies from 2000Q1-2016Q2. We divide the 66 quarters into two periods which are pre-crisis (2000Q1-2007Q2) and post-crisis (2007Q3-2016Q2) and use the ordinary least squares estimation technique to run a series of panel regressions for the whole sample and two periods, respectively.

Document type: 
Graduating extended essay / Research project
Senior supervisor: 
Jijun Niu
Department: 
Beedie School of Business - Segal Graduate School

Cash Holding and Firm Value: Evidence from the US Market from 1999 to 2015

Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2016-10
Abstract: 

This paper investigates the effect of cash holding on firm value based on a sample of the US industrial firms during the period from 1999 to 2015. The study tests the existence of a linear relationship between cash holdings and firm value. This study also investigates whether there exists an optimum cash level (a non-linear relationship where after a certain level of cash, corporate value declines). This paper uses fixed effect model on unbalanced panel data of listed the US companies (exclude financial firms) during the period of 1999-2015. Our results suggest that there is a positive linear relationship between cash holding and firm value. In addition, the results do also support the hypothesis that there exists an optimum level of cash holding for the US industrial firms from 1999 to 2015.

Document type: 
Graduating extended essay / Research project
Senior supervisor: 
Christina Atanasova
Department: 
Beedie School of Business - Segal Graduate School

Application of Pairs Trading Model to Exchange Traded Coffee Futures

Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2016-10
Abstract: 

In this paper, we use the trading model as described by Kanamura, Rachev, & Fabozzi (2010) based on the pairs trading strategies using the Stochastic Spread Method and apply that to the exchange traded coffee futures (Generic ‘KC’ commodity’). We also explain the first-time hitting density, (Linetsky 2004) for mean reverting process and apply this mathematical model to our data in order to find the results. In our empirical evidence, we test the real-time data obtained from Bloomberg in an Excel model based on co-integration approach to spread trading. We also show that the profits are consistent using the theoretical and empirical models andthat profits depend on the mean reversion and volatility of the spread during the period under consideration.

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

Volatility interactions between equity and crude oil markets: Evidence from intraday ETF data

Author: 
Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2016-05
Abstract: 

This study replicates and extends the study done by Phan, Sharma and Narayan (2015) using intraday data from two widely available exchange traded funds (SPY and USO), before and after the recent regime change, which was represented by the drop in crude oil prices of 2014. Phan, Sharma and Narayan (2015) use data from futures contracts to demonstrate that lagged trading information like bid-ask spread, number of shares traded and price volatility, from the same market and cross-market, when incorporated in a single volatility prediction setup, can significantly improve future volatility prediction for equity and crude oil markets. The main findings of our study confirms the conclusion reached by the reference paper and also demonstrate that these results hold before and after the drop in crude oil prices, which occurred in 2014.

Document type: 
Graduating extended essay / Research project
File(s): 
Senior supervisor: 
Andrey Pavlov
Phil Goddard
Department: 
Beedie School of Business - Segal Graduate School

Information Systems and Technology as Strategic Business Partner: Using the Business Disruption Impact Assessment Methodology to Uncover Teck Highland Valley Copper's Technology Needs

Author: 
Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2015
Abstract: 

There is a consensus that Information Systems and Technology (IS+T) needsto become a partner of the business by understanding its needs and expectations and offering solutions that create value. At Teck’s Highland Valley Copper (THVC)—one of Teck’s largest mines and Copper producer mixed perceptions about the value delivered by Teck’s Enterprise IS+T exist. Although users understand the importance of utilizing the services and expertise from Enterprise IS+T, solutions are seen as being implemented without fully understanding the Site’s “customer” needs. On the other hand, Enterprise IS+T sees the actions by THVC as failing to align with Teck’s strategic focus and misusing resources. This situation has created a complex IS+T environment that is difficult to sustain and with tangible risks for the Teck Resources Ltd. IS+T environment. The goal of this thesis is to respond to the question of how to best meet THVC’s IS+T needs with the services provided by Enterprise IS+T so that the effort, cost, and quality of the solutions proposed are best suited to THVC. To respond to this question a detailed and objective examination of THVC’s Business Critical Functions, Critical Applications and Technologies, and users’ needs was conducted using the Business Disruption Impact Assessment methodology. The results of this assessment uncovered a number of areas that Enterprise IS+T focus on and provide practical recommendations for THVC. The findings of this thesis may be used as an example by other IS+T professionals to uncover the actual needs and expectations of their businesses as a means to position IS+T as a true business partner.

Document type: 
Graduating extended essay / Research project
File(s): 
Senior supervisor: 
Leyland Pitt
Department: 
Beedie School of Business - Segal Graduate School

ANALYSIS OF AMMONIA REMOVAL FROM WASTEWATER MARKET: FEASIBILITY OF SALTWORKS INTRODUCING NEW TECHNOLOGY

Author: 
Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2015
Abstract: 

This paper presents an analysis of the market for removing ammonia from wastewater to assess its attractiveness and confirm the feasibility of Saltworks developing and launching its promising new ammonia removal technology. After an introduction, the paper qualitatively analyses the opportunity for Saltworks to enter the ammonia removal market using a SWOT analysis. The author’s personal experiences, Saltworks documentation, and interviews with Saltworks staff provide insight into the company’s strategies and capabilities. Current ammonia removal technologies are then reviewed. Next, Saltworks’ primary competitors in the ammonia removal market are examined using Porter’s Five Forces framework. The paper concludes with an exploration of the primary sources of ammonia pollution in wastewater using EPA and Environment Canada census data. From the analysis, it is concluded that this market overall is attractive to Saltworks. There is increasing demand for technological solutions for the removal of ammonia from wastewater. The innovative solution that Saltworks offers, although new to the market, promises to solve many of the problems besetting existing technologies. Saltworks’ technology has significant technical advantages that will allow it to enter the more profitable and less competitive segments of this market. Several segments are particularly attractive due to higher customer willingness to pay and the barriers to entry for most other competitors. Saltworkscould capture the greatest value by targeting those segments faced with high ammonia concentrations. They include landfill leachate, coal exhaust scrubbers, and concentrated animal feeding operations. This paper recommends that Saltworks target the most technologically challenging markets, where its technology has a technical advantage over competitors, to find early adopters to purchase initial installations. After establishing itself in the industry, Saltworkscan lower prices and enter lower value market segments to continue growing.

Document type: 
Graduating extended essay / Research project
File(s): 
Senior supervisor: 
Elicia Maine
Department: 
Beedie School of Business - Segal Graduate School

A STRATEGIC ANALYSIS OF BESTLINE LUBRICANTS’ DIESEL ENGINE TREATMENT

Author: 
Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2015
Abstract: 

BestLine International Research, Inc. has recently produced evidence suggesting their engine lubricant technology may be the solution to the Engine Lubricant Industry’s challenge to find a substitute for the additive ZDDP as an anti-wear agent. In addition, BestLine has been able to validate, through third party testing, the superior performance of its aftermarket lubricants, in comparison to its direct competitors’ products. BestLine has also protected its technology through several patents. Despite BestLine’s superior technology, it has not been able to generate sufficient profits to pay out dividends to its shareholders. Furthermore, Bestline has not received sufficiently attractive offers to warrant selling or licensing their technology. This report presents a strategic analysis, within the context of the engine lubricant industry in North America, to assess BestLine’s current strategy. The results of the analysis suggest that BestLine’s current strategy is insufficient for it to fully leverage its intellectual property or the opportunity to replace ZDDP. Three alternative strategies have been proposed, and it has been determined that the most effective strategy is for BestLine to make heavy investments in marketing such that the brand is most quickly legitimized and BestLine’s technology draws the most attention from potential buyers or licensers.

Document type: 
Graduating extended essay / Research project
File(s): 
Senior supervisor: 
Dr. Elicia Maine
Department: 
Beedie School of Business - Segal Graduate School

Tournament versus Team in Executive Compensation

Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2015-12
Abstract: 

The executive ranking pay gap within the company is a continuous debated topic. Prior research has developed two different theories---tournament and teamwork. Tournament theory advanced by economists Edward Lazear and Sherwin Rosen describes wage differences driven by the desire to have incentives to work hard in order to promote within the company towards the top position.

 

Teamwork theory however suggests that the large gap between higher-level executives and their lower-level executives can reduce motivation and create conflicts within the organization. In this paper, we use the Herfindahl–Hirschman Index (HHI) to measure the distribution of the top five executives’ compensation and abnormal return to measure firm performance. We find no evidence supporting tournament theory over teamwork theory.

 

A portfolio of firms with high concentration of executive pay outperforms that of firms with low concentration pay. However, these results do not stand at the firm level, once we control for other firm characteristics.

Document type: 
Graduating extended essay / Research project
Senior supervisor: 
Amir Rubin

The effect of alternative investment in hedge funds

Author: 
Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2015-12
Abstract: 

Given that there is a growing emphasis in the field of alternative investment, this paper studies the effect of alternative investment in hedge funds and tests whether hedge funds that take positions in non-standard asset classes outperform hedge funds that take positions only in equity and fixed income securities.

 

The Fung and Hsieh (2004) seven-factor model is used to analyse the hedge fund returns. The seven-factor model is first tested with a substitute factor as the original factor data ceased to exist by 2007, then is extended to cover 2000-2006, 2007-2010, 2011-2015 period to examine its explanatory power, and finally used to obtain the alpha return of the hedge funds. The alpha return will be separated into two groups, with verse without alterative investment exposure. The alphas are tested to see if there is any difference between the two groups. An empirical comparison base on pure return will also be presented.

 

We observe that the funds which have weights in non-standard assets earned a statistically significant excess alpha than the funds without exposure during the 2007 to 2010 period. It is possible that funds with investment in the non-standard assets could outperform those without exposure in future.

Document type: 
Graduating extended essay / Research project
Senior supervisor: 
Peter Klein