Finance Dissertation Momentum Trading Strategy

Utilizing Momentum Trading Strategy on the UK Stock Market: Challenging Efficient Market Hypothesis

A number of studies have illustrated that stock returns may be predictable through implementing a momentum trading strategy, which contradicts the whole concept of the Efficient Market Hypothesis. This paper will discuss the Efficient Market Hypothesis and focus on its challenges in the face of behavioral finance. In addition, empirical research is conducted to test whether a momentum strategy can be implemented to successfully beat the market.

This dissertation draws on the framework developed by Jegadeesh & Titman (1993), while also taking ideas from other relevant scholars in the field, and analyses the monthly returns generated from the momentum strategy used, examining whether the returns in each constructed portfolio is greater than the return of the UK stock market (FTSE All-Share market index) for the period 2016, based around Brexit, an event which had an influence on the stock market as a whole, and construct another set of portfolios one-year prior to the event, to act as a control for comparability and to test validity of the momentum strategy being used to generate excess returns.

From the empirical data, it is seen that in the Brexit portfolios, every portfolio beat the market, however for the pre-Brexit portfolio, a few portfolios under performed the market, with the majority beating the market. Although the two time periods tested had dissimilar results, this dissertation can still confirm that the use of the momentum strategy can be used to predict future returns, and manage to earn abnormal returns.

This dissertation is inspired by the desire to gain a greater understanding of the financial markets, through implementing momentum trading strategies and examining anomalies to exploit any market inefficiencies. The research is motivated by a strong personal interest in the general topic areas and perceived gaps in existing literature. Moreover, financial market efficiency is the central importance to practitioners, investors, corporations and regulators, with financial theory being based around the belief that financial agents and markets are rational.

Furthermore, investors depend greatly on strategies which observe stock market behaviour, a key focus of this research. Also, with the continuous success of individuals such as George Soros and Warren Buffett, they represent the most immutable contradiction of market efficiency theories, that returns are unpredictable.

Momentum Trading Strategy Dissertation
Momentum Trading Strategy Dissertation

 

Momentum Trading Strategy Dissertation

Dissertation Contents

1: Introduction
Background to the study
Rationale
Research objectives
Importance of the study
Structure of the dissertation

2: Literature Review
An introduction to the Efficient Market Hypothesis (EMH)
Testing the efficient market hypothesis
Testing the weak-form efficiency
The Filter approach
The Dow Theory
Testing the semi-strong form efficiency
Event Studies
Stock Splits
Testing the strong-form efficiency
Anomalies
The calendar effect
The January effect
Behavioural Biases
Under-reactions, over-reactions and contrarian strategy
Momentum trading

3: Methodology
Data
Time period to test
The United Kingdom’s withdrawal from the European Union (Brexit)
One year prior to United Kingdom’s withdrawal from the European Union (pre-Brexit)
Formation Period and Holding Period returns
The Zero-Cost Trading Strategy
Validity test
Strategies characteristics
Hypothesis Test
Null Hypothesis (H0)
Alternative Hypothesis (H1)

4: Results and Analysis
Findings
Results for 3-months formation period
Results for 6-months formation period
Results for 9-months formation period
Results for 12-months formation period
Testing the validity of the research results
The January Effect
Effect of the EU Referendum on the test results
Summary of research results

5: Conclusion
Summary
Limitations of the study and suggestions for further research

Bibliography

Appendix

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View This Dissertation Here: Finance Dissertation Efficient Market Hypothesis Financial Markets

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Corporate Decision Making Capital Structure Financial Markets

Capital Structure and Corporate Decision Making: The Role of Compensation Plans on Managerial Decisions in Relation to Stock Performance in the Financial Markets

This dissertation attempts to answer the research question as to whether compensation plans provide better incentives for managers to take risks and increase stock performance in financial markets by corporations. Objectives aimed at examining whether compensation plans influenced managerial decisions and overall future stock performance in corporations. Another objective assessed effectiveness of compensation plans towards managerial risky decisions and performance.

The author’s central argument was that compensation arrangements and efficient market information functionality motivated managerial decisions that increased future stock performance in corporations. The research methods adopted comprised of qualitative research methods that linked past evidence, theories and research works by other scholars to reaffirm or refute previous theories.

The methodology maintained an empiricist paradigm and research that made sense through objectivity realised from collected data. The models sought explanations and predictions with an aim of confirming, or substantiating relationships, as well as assembling generalisations on theoretical frameworks. Qualitatively, trends, gaps and opportunities were critically examined using desktop appraisal of secondary literature, documents, journals, books and reports. Content analysis method detailed systematic assessment of substances in specific materials aimed at identifying patterns, themes, or biases.

Capital Structure Financial Markets
Capital Structure Financial Markets

The review finds consistent literature to demonstrate that indeed compensation arrangements contribute to performance by managers. Organizations that link compensation plans with individuals could attract egoistic kind of CEO. Extrinsic incentives, particularly money, correlated with the largest productivity in terms of stock performances. Skills-based compensation plan now forms the new trend when identifying potential CEOs. Additionally, when designing compensation arrangements, one should balance with conflicting objectives by the shareholders, executives and corporations. What worked for firm A cannot be assumed to work for firm B because each corporation is distinct in size, philosophy, values and objectives.

Dissertation Objectives

  1. To examine whether compensation plans influence managerial decisions and overall stock performance in corporations
  2. To assess effectiveness of compensation plans towards managerial risky decisions and performance

Dissertation Contents

1 – Introduction
Research Question
Objectives
Rationale
Statement of the Problem

2 – Literature Review
Does Compensation Plan and Risky Decision Taking Translate to Better Performance?
The Role of Financial Markets in Managerial Decision Making
Forms of Compensation Plans
Effectiveness of Compensation Plans, Risky Managerial Decisions and Performance
Theoretical Perspectives

3 – Research Methodology
Qualitative Methods
Content Analysis
Limitations

4 – Research Findings
The Hard Facts
Why Compensation arrangements and Performance Metrics?
Compensation Arrangements
Short and Long-term Bonus Measures
Performance Units/Shares
Options
Human Resource Methods
The Bogey Plan
Relative Performance Evaluation (RPE)
Informational Function of Managerial Decision Making by Financial Markets
The Correlation between Compensation Plans, Risky Decision Making and Performance
Reasons for compensation plans
Reasons against compensation plans
Compensation arrangements and its Effectiveness towards Performance

5 – Analysis and Discussion

6 – Conclusions

Bibliography

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You Can Find Finance Dissertations Here: Finance Dissertation Titles

Forecasting Stock Price

Finance Dissertation Forecasting Stock Price Volatility

Title: Forecasting Stock Price Volatility – This dissertation addresses the question of whether there might exist a more accurate method of forecasting volatility that those in common use today. More specifically the project restricts its scope to stock prices since historical data, including pricing, for these assets are transparent, readily available and voluminous. Before moving on to the research hypothesis, however, a final general observation about volatility is, perhaps, in order.

Volatility is a useful proxy for risk and it is commonly treated as such in the financial literature and mathematical models. However there is a countervailing viewpoint that volatility is not exactly the same thing as risk. A stock that rises exhibits high volatility, but if that rise is based on business fundamentals then the underlying risk may not have moved. The research hypothesis for this dissertation is that recent advances in machine learning and deep neural nets allow the construction of a high performance volatility forecasting model that is easier to configure correctly and more stable against changes in model hyperparameters or inputs.

An LSTM based recurrent neural network architecture is proposed as suitable for time series forecasting. Data from the CRSP US Stock Database and Google Trends is used to construct training patterns and testing patterns and the model is subjected to fifteen different training scenarios. These scenarios vary the model hyperparameters and inputs, and compare the consequent performance against three common benchmark forecasting models.

The model is found to perform well in most scenarios, be easy to configure and demonstrates good resilience to hyperparameter and input changes. In the highest performing configurations, the model demonstrated an RMS error rate less than 50% of the next best performing benchmark.

Forecasting Stock Price Dissertation
Forecasting Stock Price Dissertation

Dissertation Contents

1 – Introduction
Hypothesis

2 – Research Goal

3 – Theory
Stochastic Volatility
Volatility Forecasting
Artificial Neural Networks
Recurrent Neural Networks
Long Short-Term Memory
Tensors

4 – Data Sources

5 – Model Design
Basic Architecture
Input/Output Transformation
Training
Input Features
CRSP Features
Google Trends Features
Input Tensor
Output Tensor
Implementation Outline
Model Visualisation

6 – Experimental Results
Analysis of Scenarios

7 – Analysis

8 – Conclusions and Future Directions

References

View This Dissertation Here: Finance Dissertation Forecasting Stock Price Volatility

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Where Can I Find Finance Dissertations

I hope you enjoyed reading this post on Forecasting Stock Price Volatility. There are many other dissertation titles available in the Finance Dissertation Collection that should be of interest to finance students and practitioners. There are many dissertation titles that relate to other aspects of finance such as Financial Management, Global Finance, International Banks, Foreign Direct Investment, FDI, Investment Banking, Corporate Strategy, Risk Management, Finance Portfolios, Share Prices, Capital Investment, Financial Planning and Micro-Finance to name a few. I would be grateful if you could share this post via Facebook and Twitter. Feel free to add your thoughts in the comments section. Thank you.

Dissertation Bank Profitability South Africa

Determinants of Bank Profitability in South Africa

Dissertation Title: Determinants of Bank Profitability in South Africa. The prime rationale for conducting the research is to find the factors that affect the bank’s profitability in the South African region so that appropriate measures can be taken to improve the financial performance. This research provides empirical evidence based on the analysis of the bank’s real financial data in support of the determinants of the bank’s profitability. Thus, this research is considered to be useful in enhancing the knowledge of the bank professionals, as well as the students pursuing higher studies in finance and banking.

The banking sector has been blamed the most for the financial crisis that happened in the recent past. Therefore, it has been perceived to be very important to research and find the factors that affect the bank’s profitability so that the situation could be controlled in the cases of the financial crisis. In this context, this research explores the relationship of the factors such as liquidity, management efficiency, capital adequacy, the scale of operations, productivity of assets, growth in gross domestic product, and inflation with the return on equity.

Bank Profitability Dissertation
Bank Profitability Dissertation

The primary aim of this dissertation is to explore the determinants of bank’s profitability in the South African region. For this purpose, the research is aimed to find the crucial factors that affect the bank’s profitability in the South African region. Further, in this regards, the degree of influence of the factors on the bank’s profitability has also been evaluated in this dissertation. With regards to the research aim, the following objectives have been developed, which are to be addressed in this research:

  • To review, research, and understand the regulatory framework prevailing in the South African region
  • To study the bank system in South Africa through developed models and evaluate the factors, which contribute to the bank’s profitability
  • To explore the determinants of bank’s profitability in the South African region

Dissertation Contents

Introduction
Background of the Research
Rationale for Doing the Research
Aim and Objectives
Research Question
Significance of the Research
Organisation of the Research

Literature Review
Bank Specific Factors Affecting the Profitability
Size of the Bank
Capital
Credit Risk Management
Product and Service Portfolio
Efficient Management Team
Liquidity Management
Industry or Sector Specific Factors
Banking Regulation in South Africa
Gross Domestic Product
Inflation
Prime Lending Rates
Taxation and Foreign Trade

Topic Description

Research Methodology
Research Question
Research Approach
Research Design
Data Collection Method
Selection and Justification
Sample Size and Sampling Strategy
Data Analysis Process and Tools
Ethical Considerations
Limitations of the Research

Data Analysis
Analysis of the CAMEL Ratios
Liquidity
Capital Adequacy
Efficiency
Non-Performing Loans
Net Interest Margin
Productive Asset Ratio
Size Ratio
Advance and Loans to Deposit Ratio
Analysis of the Gross Domestic Product
Analysis of the Inflation

Discussion

Conclusion
Brief Summary
Conclusion
Recommendations

View This Dissertation Here

For more tips on how to write your own finance and accounting dissertation check out the Finance Dissertation Collection today. The collection contains many finance dissertation topics and dissertation titles. If you enjoyed reading this post on Determinants of Bank Profitability in South Africa, I would be very grateful if you could help spread this knowledge by emailing this post to a friend, or sharing it on Twitter or Facebook. Thank you.

Corporate Accounting Dissertations

Corporate Accounting – Significance, Application and Standards

Corporate Accounting is one of the major parts in financial management procedures of an organization. Accounting practices are necessary for a company in order to show how an organization has been successfully operating over the course of the year and making future plans for budgets and expenditures (Das, 2011). However, it is studied that accounting is a broadest term which have several branches and areas for different business and for different purposes. In which some of them are financial accounting, cost accounting and corporate accounting (Malwitz, 2008). However, this paper is merely focusing on defining the corporate accounting by incorporating corporate accounting theories, significance, concepts, legislation, applications and standards.

Corporate accounting is a special branch of accounting which can be defined as the quantity, recording and interpretation of financial information and data of a limited company which can be either a public limited company or a joint stock company (Fyler, 2013; Ijiri, 1980). Moreover, it is found that corporate accounting is an accounting which is particularly for larger companies since smaller-scale companies, sole traders or partnerships business cannot implement corporate accounting to maintain their financial record or information.

It is because smaller-scale companies, sole traders or partnerships businesses have not much requirements and demands in order to fulfil the accounting standards and to meet with accounting principles (Ijiri, 1980). On the other hand, large scale organizations or limited companies have sufficient financial information and data that they have to show to the general public and regulatory bodies therefore they have to maintain proper financial records with the help of corporate accounting (Fyler, 2013; Ijiri, 1980; Das, 2011).

Furthermore, it is studied that corporate accounting also deals helps the limited companies or large scale organizations in term of preparing final accounts, maintaining cash flow statements, analysing and interpreting financial results of the respective company particular for any specific events such as amalgamation, absorption, and helps company in preparation of consolidated balance sheets (Paton & Littleton, 1986).

By reviewing several studies, it is identified that the corporate accounting has some basic principles and foundations on which the overall accounting practices are based. The key foundations of corporate accounting include Accounting Cycle, Double Entry Accounting, and financial statements (Bennett, 2013). In which Accounting Cycle involves the regular recording and reporting of financial data or information. The accounting cycle completed within a specific period of time as per the policies of companies. Usually, it completed in a month or year.

Corporate Accounting Cycle

The accounting cycle begins by recording all financial transactions such as cash exchanges or debits and credits by using a general ledger approach. General Ledger is a precise and clear summary of all accounts including payable and receivable (Bennett, 2013; Ijiri, 1980). The next stage of accounting cycle is the adjustment of general ledger which can be done by taking items or entries which are not the direct transactions, such as bad debt, taxes and accrued interest. Thus, it is a key area therefore accountants must ensure that revenues and expenditures are match up as per each accounting period. In case, of accountant failed to do this properly, it can lead to confusion over financial irregularities and at the end of the period it can create confusion in overall revenue and total profit for the period (Bennett, 2013; Ijiri, 1980).

The second key element of the corporate accounting is double entry accounting, which can be defined as the standard accounting concept used by limited companies or large scale organizations. The basic of double entry accounting is based on the notion that for all actions there is an equal and opposite reaction (Bennett, 2013; Ijiri, 1980). It means that when a financial gain takes place in any part of financial statement, it should be escorted by a loss somewhere else on the balance sheet.

Corporate Accounting Dissertations
Corporate Accounting Dissertations

Suppose that of if a limited purchases a product to sell, so it will show the decrease in cash in financial statement and in the same way it will show the increase in inventory of certain organization (Bennett, 2013; Ijiri, 1980). Finally, the financial statement is another key aspect of corporate accounting, which is refers to the financial reports prepared at the end of the company’s financial year.

This financial report basically includes the cash flow statements, balance sheets and income statements for the previous 12 months. The financial reports of an organization show the summary and of all financial activity including overall profits or losses incurred by respective company (Bennett, 2013; Ijiri, 1980). Furthermore, it has been examined that the financial report helps accountant of a limited company in terms of preparing tax returns, while stockbrokers and investors use the same financial reports for the comparison between respective company and international business performance.

In addition to this, it is found that the financial reports also help the managers of certain company in terms of a assessing the performance of the company as well as in making proper plan and budget for company to successfully execute its operation in upcoming year. Following is the table that represents the different accounting terms used in UK and USA (Joos & Lang, 1994):

Table 1 – Accounting Terms as Per UK and USA Standards

United States of America United Kingdom
Balance sheet/Statement of financial position Balance sheet
Inventory Stock
Treasury Stock Own Shares
Receivables Debtor
Payables Creditors
Provisions Accounting for loss contingencies
Stocks Shares
Retained Earnings Profit and loss Reserves
Paid in surplus Shares premium account
Management’s premium of operations Operating review
Management’s discussion of financial resources and liquidity Financial Review
Fiscal year Financial year
Income statement/Statement of earning Profit and loss account
Revenue/sales Turnover
Affiliated company Associated company
Earnings per share Net income per share
Scrip dividend Stock dividend
Balance sheet Balance sheet/Statement of financial position
Tangible fixed assets Property, plant and equipments

In addition to the above, it is identified that in most of the limited companies particularly in UK (United Kingdom) and USA (United States of America), for the preparation of financial reports or execute corporate accounting practices specific accounting standards are used which are only set in common law (Joos & Lang, 1994). However, in different countries, it has been studied that the corporate accounting are different from each other therefore different countries uses different accounting regulations in order to maintain financial records and for the preparation of yearly financial reports.

Furthermore, it has been examined that throughout the world there are two types of accounting standards are used which includes the International Financial Reporting Standards (IFRS) and the Generally Accepted Accounting Principles (GAAP) (Young & Wiley, 2011; Everingham, et al., 2007).In which International Financial Reporting Standards (IFRS) provides rules for business affairs from the global perspective in which the accounts and financials of a company can be understood and compared across international boundaries (Young & Wiley, 2011; Everingham, et al., 2007). On the other hand, General Accepted Accounting Principles (GAAP) provides rules to collect and interpret financial data for multinational competitors with the help of financial statement (Young & Wiley, 2011; Everingham, et al., 2007).

International Financial Reporting Standards

It is further examined that the International Financial Reporting Standards (IFRS) are mostly adopted by the companies operating throughout the European Union. Beside it, the organization in several countries like Australia, South Africa and Russia are also now widely followed IFRS accounting standards for the recording of financial information and analysing and interpreting financial data. In contrast, specifically in the United States limited companies are bound to utilize the GAAP accounting standards for all kinds of accounting practices (Young & Wiley, 2011; Everingham, et al., 2007).

Thus, it has been concluded that, the corporate accounting system allow companies to successfully maintain financial data as per their company policies, regulated accounting standards and accounting principles or laws determined by common law.

References

Bennett, R. (2013) Corporate Accounting Basics. Free Press.

Das, B. (2011) Is Corporate Accounting a science or an art? Accounting, pp. 1-1.

Everingham, G. K., Everingham, G., Kleynhans, K., Posthumus, L., Kleynhans, J. E., & Posthumus, L. C. (2007) Principles of Generally Accepted Accounting Practice. Juta and Company Ltd.

Fyler, T. (2013) What Is A Definition Of Corporate Accounting

Ijiri, Y. (1980) An Introduction to Corporate Accounting Standards: A Review. The Accounting Review, 620-628.

Joos, P., & Lang, M. (1994) The Effects of Accounting Diversity: Evidence from the European Union. Journal of Accounting Research, 32, 141-168.

Malwitz, M. (2008) Financial Consolidation and Reporting Solutions: Adding Value to Enterprise Resource Planning Systems. Oracle Paper, pp. 1-21.

Paton, W. A., & Littleton, A. C. (1986) An Introduction to Corporate Accounting Standards. Amer Accounting Assn.

Young, E. &., & Wiley, J. (2011) International GAAP 2012 – Generally Accepted Accounting Practice Under International Financial Reporting Standards. John Wiley & Sons.

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