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    Essays on high-frequency trading : a thesis presented in partial fulfilment of the requirement for the degree of Doctor of Philosophy in Finance at Massey University, Manawatu campus, New Zealand
    (Massey University, 2023) Zaharudin, Khairul Zharif
    This thesis presents a comprehensive review of the relevant literature on high-frequency trading (HFT). There is no universal definition on HFT to date, leading to inaccurate estimations of their reach and impact in the market. HFT is a specialised form of algorithmic trading with lightning-speed network and implement complex trading strategies. HFT may have both beneficial and harmful effects on the market, and their speed could disrupt the market at remarkable pace. There are several controversies related to HFT, including the 2010 flash crash, social welfare and arms race, and market-making responsibilities. Several initiatives were implemented or proposed as a response to HFT, including speed bumps, price improvement rules, and new trading mechanics to guarantee a fair and orderly market for everyone. The second essay examines the impact of relative tick size on HFT activity. Using data from Australian equity markets, relative tick size is shown to have an inverse relationship with HFT activity. The findings demonstrate that HFTs have a very low tolerance for adverse selection risk, and their risk-averse nature prioritise risk minimisation (order-undercutting) over profit maximisation (order-queuing). The results lend credence to the perception that the primary strategy of HFTs is to generate thin profits while keeping their risk exposure to an absolute minimum. The evidence imply that policymakers may implement a dynamic tick size policy to allocate HFT activity into stocks where it is most required. The third essay illustrates how expected volatility affects HFT activity, and how the resulting change in HFT activity impacts liquidity. Using data from S&P/ASX 200 VIX index (AXVI) to measure sentiment, evidence suggests that when the sentiment is negative: (i) HFTs’ ability to promote trading volume on the ASX is hampered; (ii) HFTs’ ability to reduce spreads on the CHIX is dampened; and (iii) HFTs’ ability to reduce price impact is amplified on both markets. Overall, HFTs’ presence may significantly reduce excessive price impacts when the market is fearful. Therefore, any attempt to completely ban or restrict HFT in the market might accidentally eliminate valuable market participants.
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    Essays on gender and investment decisions : a thesis presented in fulfilment of the requirements for the degree of Doctor of Philosophy in Finance at Massey University, Albany, New Zealand
    (Massey University, 2020) Sehrish, Saba
    The puzzle of whether gender differences exist in behavioral biases and investment preferences of highly skilled and experienced professionals remains unsolved. Subsequently, this thesis consists of three related essays on investment decisions by gender of professionals in the field of finance. The first essay shows that prospect theory value influences insider trading decisions, and the impact is stronger among female executives’ trades. Female insiders tend to carry more biased trades and suffer significantly higher resultant losses, as compared to their male counterparts. Female insiders who buy (sell) when their company's prospect theory value is above (below) other firms’ prospect theory values, lose 47 basis points over the next month. While the findings contradict the overconfidence hypothesis that predicts poor trading decisions by male insiders, the results are consistent with the male insiders’ superior information access hypothesis, suggesting that informational disadvantage serves as a possible channel of higher behavioral biases in female insiders’ trading. The second essay demonstrates that the gender of mutual fund managers affects the liquidity of a portfolio. Female managers prefer higher portfolio liquidity than their male counterparts. Funds managed by single female managers are 8-25% more liquid than single male managed funds. Contrary to the excessive trading hypothesis that expects a higher liquidity preference by overconfident male fund managers, the findings support the inclination of female fund managers for the price efficiency hypothesis. Funds experience increased liquidity when they transition to a female manager. The third essay documents that the collective self-construal of female fund managers explains their tendency to invest less actively as compared to their male counterparts. Funds with a higher proportion of female managers in the management team closely track the multifactor benchmark. For the funds managed by more female managers than males, the economic benefits of diversification are 1.86% lower than other funds. Consistent with the literature, female fund managers herd more, take less risk, and are less overconfident than males. These investment behaviors are likely to be the possible explanations of the less active investing strategy of female fund managers.
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    Portfolio selection by homogeneous programming : a New Zealand case study : a thesis presented in partial fulfilment of the requirements for the degree of Master of Arts in Economics
    (Massey University, 1985) Young, Martin
    For investment managers through to the individual the task of solving their particular portfolio problems remains a principal objective. It has been shown that an efficient portfolio can be specified in terms of its expected return and profit variance, (risk), that is the first two moments of the investor's subjective yield distribution. Selection of an efficient portfolio can always be achieved by quadratic or homogeneous programming. An integral part of the efficient portfolio selection process by homogeneous programming lies in the use of the truncated minimax criterion which gives a measure of risk preference, m. Varying m will give the complete set of efficient portfolios from all possible ones. This is detailed in chapter one where it is also shown that an optimal portfolio which allocates the budget with maximal caution can be selected from among the efficient ones under the additional criterion that the marginal value of the investment dollar is not exceeded by its marginal cost. Using a specified algorithm an optimal portfolio is selected from stocks qualifying as Trustee Investments under the Trustee Amendment Act 1974 listed on tho New Zealand Stock Exchange. Chapter two details the manner in which a five year data base of weekly observations, 1979 to 1983 inclusive, was developed for this operation and gives the preliminary results of expected return and profit variance for the stocks selected. A printout of the complete data file is included in the appendix. Chapter three of this thesis shows in detail the manner in which the algorithm is applied and gives a final result using weekly data over the four year period, 1980 - 1983 inclusive. The characteristics of this optimal portfolio are shown together with details of its performance over the twelve month period Jan - Dec 1984. Finally consideration is given to the robust nature of the portfolio selection system by looking both at a range of efficient portfolios selected from the four year data and also an optimal result from the full five year data.
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    Accounting standards complexity, audit fees and financial analyst forecasts in Australia : a thesis submitted in fulfilment of the requirements for the degree of Doctor of Philosophy in Accounting at Massey University, Albany, New Zealand
    (Massey University, 2017) Miah, Muhammad Shahin
    While the beneficial effects of International Financial Reporting Standards (IFRS) on financial reporting quality, cost of capital, cross-country investment, corporate decision making and governance are well studied in the literature, there is relatively little research on the cost side of IFRS adoption and its impact on users. This thesis contributes by investigating the impact of IFRS complexity on two important groups of users of financial reports namely auditors and financial analysts. The hypotheses are built on the premise that principles-based standards are more complex than rules-based standards. This study examines the relationships between IFRS complexity, audit fees, and analyst forecast properties. IFRS is likely to require more of auditors in terms of professional expertise, time and effort, hence resulting in higher audit fees. Financial analysts may be similarly affected by the complexity of IFRS resulting in less accurate forecasts on key financial components. This thesis measures IFRS complexity based on individual IFRS standards specifically identified as having higher levels of complexity. Scores are then calculated to indicate the difference between these IFRS standards and their equivalent previous domestic accounting standards. The degree of complexity is also measured at aggregate level to indicate an overall complexity impact based on the combined score for all identified 'complex' IFRS standards. Findings indicate that aggregate IFRS complexity is positively and significantly associated with audit fees but that specific IFRS standards are identifiable as being paiticularly complex, hence explaining much of the positive relationship with audit fees. The results also reveal that the incremental effect of IFRS complexity on audit fees is more pronounced when finns are audited by city-level industly specialists as opposed to those audited by non­industly specialists. Furthermore, IFRS complexity is found to have a positive and significant association with analyst forecast properties (forecast errors, forecast dispersion, and forecast revision). Surprisingly some of the standards identified as being more complex for auditors (i.e., driving higher audit fees) do not appear similarly complex in relation to financial analyst forecast properties. Finally, this thesis investigates the moderating role of high quality audits (proxied by industry specialist auditors) on complexity and analyst forecast properties and finds that forecast errors decrease for firms which are exposed to higher levels of IFRS complexity if they are audited by city-level industly specialists. This study provides important insights for regulator regarding the complexity of specific IFRS standards. Findings may also be of benefit to countries which are in the process of adopting IFRS or planning to do so.
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    Financial analysis of MAFTech bull beef investment opportunity : a research report presented in partial fulfilment of the requirements for the degree of Master of Business Studies at Massey University
    (Massey University, 1989) Cowley, Anna Margaret
    MAFTech has established an investment opportunity whereby a nonfarming investor can provide the capital required to farm bull beef. The farmer and the investor share the returns from the investment, with the investor having a first charge over the proceeds received from the sale of the beef up to the amount of the initial capital injection. This type of investment scheme differs from more conventional form of investment. However, in order to compare this scheme with the more common forms of investment it is necessary to evaluate it to enable an optimal investment decision to be made. Hence the market for the production of bull beef is appraised. The risk involved in this investment is outlined and a sensitivity analysis to changes in price and weight conducted. Using this risk and return information a comparison with other investments is then made.
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    Stochastic portfolio programming, competitive market equilibria, and market portfolios and risk profiles : a New Zealand capital market analysis : a thesis presented in fulfilment of the requirements for the degree of Doctor of Philosophy in Finance at Massey University
    (Massey University, 1996) Young, Robert Martin; Young, Robert Martin
    Mainstream modern portfolio theory has developed around the portfolio selection and asset pricing models of Markowitz' mean-variance criterion, the Capital Asset Pricing Model, Arbitrage Pricing Theory and, more recently, the models of continuous-time finance. In the early 1960's Paul van Moeseke developed a model of asset allocation under risk conditions and, in the first instance, this thesis is a restatement of this model. To date this model has been largely overlooked by mainstream finance but it has several significant features in its favour. The model explicitly determines the risk profiles of particular financial markets by focussing on the marginal return to these markets and equating this marginal return to the investment dollar's marginal cost. As marginal cost will differ between investors the model allows for a heterogeneous investor base. Another feature of the model is that it has application across the entire risk spectrum. This thesis discusses the Moeseke model within the framework of modern portfolio theory and provides extensions to this model. In presenting the model, attention is given to the development and major criticisms of asset pricing models and portfolio selection techniques in general. Extensions to the model incorporate the monetary policy procedures used in New Zealand since the late 1980's and consider the application of the model in times of negative real returns. This thesis also discusses the relationship between the Moeseke model and the Arrow-Debreu model of general economic equilibrium. A major empirical application of the model is undertaken for New Zealand's capital markets to determine the value and stability of their risk profiles. It is found that the risk profile of the New Zealand stock market is similar to that found previously for the United States and Canada with a high degree of stability. Risk profiles for the fixed interest market and the managed funds industry are also estimated. The determination of the marginal cost of the investment dollar for individual investors, institutions and international investors investing in New Zealand's capital markets is a key component for the model's application. A process for estimating these marginal costs is proposed together with these estimates. This thesis argues that the Moeseke model and the extensions have a useful contribution to make to the modern portfolio analysis and selection process.
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    Candlestick technical trading strategies : can they create value for investors? : a thesis presented in fulfilment of the requirements for the degree of Doctor of Philosophy in Finance at Massey University, Palmerston North, New Zealand
    (Massey University, 2005) Marshall, Benjamin Richard
    This thesis examines the profitability of the oldest known form of technical analysis, candlestick trading strategies. Unlike traditional technical analysis which is based around close prices, these strategies generate buy and sell signals that are based on the relationship between open, high, low and close prices within a day and over consecutive days. Traditional technical analysis, which has been the focus of previous academic research, has a long-term focus with positions being held for months and years. In contrast, candlestick technical analysis has a short-term focus with positions being held for ten days or less. This difference is significant as surveys of market participants indicate that they place 50 per cent more importance on technical analysis for horizons of a week than they do for horizons of a year. Candlestick technical analysis was developed on rice data in Japan in the 1700s so the tests in this thesis, using Dow Jones Industrial Index (DJIA) component stock data for the 1992 - 2002 period, are clearly out of sample tests. These tests are more robust to criticisms of data snooping than is the existing technical analysis literature. Proponents of technical analysis in the Western world would have had the opportunity to have become aware of candlestick trading strategies by this study's timeframe and would also have had the opportunity to source the data and software necessary to implement these strategies. So, a direct test of market efficiency is possible. This was not achievable by authors of many previous papers, who used data starting in the early 1900s and techniques that could not have been implemented at that time. Using an innovative extension of the bootstrap methodology, which allows the generation of random open, high, low and close prices, to test the profitability of candlestick technical trading strategies showed that candlestick technical analysis does not have value. There is no evidence that a trader adhering to candlestick technical analysis would out-perform the market.