https://www.um.edu.mt/library/oar/handle/123456789/23524 2026-04-23T18:29:28Z 2026-04-23T18:29:28Z https://www.um.edu.mt/library/oar/handle/123456789/40333 2019-02-23T02:27:22Z 2017-01-01T00:00:00Z

Title: European banks and risk management : did the recent financial crisis have any impact? Abstract: The role played by risk management in the recent financial crisis has been widely studied by a broad range of literature. This paper investigates whether the implications of strong risk management practices on performance and market rewards during a single wave crisis are consistent with those of a multiple wave prolonged crisis defined as ranging between 2008 and 2011. Furthermore, it investigates whether a prolonged crisis period encourages banks to permanently strengthen their risk management practices during or post the crisis turmoil, potentially capturing elements of bank risk culture. Results show that strong risk management practices do not lead to superior bank performance and market rewards during a multiple wave crisis period. Additionally, the paper finds that banks which perform worse during a multiple wave crisis period fail to later improve their risk management practices. Description: M.SC.BANK.&FIN.

2017-01-01T00:00:00Z https://www.um.edu.mt/library/oar/handle/123456789/40332 2019-02-23T02:27:24Z 2017-01-01T00:00:00Z

Title: The alternative investment fund managers' directive : an evaluation of its impact on the hedge fund industry's practices Abstract: The financial markets are nowadays facing increasing regulatory requirements through the enactment of new Directives and Legislation with the aim of protecting investors as well as market integrity particularly since the recent credit crisis. At the same time, reports show that whilst the level of investor inflows and assets under management within the hedge fund industry have increased, the number of players in this industry has not. Motivated by such shifts in the industry, this dissertation seeks to determine the impact of regulations on hedge funds. This is done by using the Alternative Investment Fund Managers’ Directive (“AIFMD”) as the first piece of EU Legislation which regulates the European hedge fund industry. In this respect, it examines how the implementation of this Directive has impacted hedge fund practices in terms of return misreporting. It also seeks to analyse the level of exposure by hedge funds to key risks identified by the AIFMD as well as the extent of risk-adjusted performance achieved after the implementation of the Directive. Accordingly, in order to achieve the above, this dissertation empirically analyses the monthly returns of 233 hedge funds, which have been impacted by the transposition of the AIFMD across varying degrees, over the period covering from January 2010 to August 2016. Return misreporting has been assessed through a number of tests which were undertaken on the reported returns. On the other hand, a regression analysis through the adoption of an extended Fung and Hsieh’s (2004) seven-factor model, was used to examine the risk-adjusted performance and the risk factor loadings. Findings suggest that regulation does impact hedge fund practices and performance. In this respect, it is shown that after the implementation of the AIFMD, return misreporting by hedge funds impacted by the AIFMD decreased. This in turn signifies that increased regulatory oversight can lead to a reduction in opportunistic behaviour by hedge fund managers. Likewise, requirements to have an independent risk management function and adequate risk management techniques appear to have provided a more balanced risk exposure towards common risk factor loadings (such as market risk and credit risk), post implementation of the Directive. It has also been found that investors appreciate the value of hedge fund oversight such that they are willing to forego alpha in order to be invested in regulated fund structures. This research has therefore shown that whilst there is undoubtedly a cost towards regulation in fund performance, one ultimately needs to also account for the investors’ risk appetite and the investors’ trade-off between investing in a regulated structure and return. Description: M.SC.BANK.&FIN.

2017-01-01T00:00:00Z https://www.um.edu.mt/library/oar/handle/123456789/40329 2019-02-23T02:27:50Z 2017-01-01T00:00:00Z

Title: Volatility spillovers and dynamic conditional correlation between stock market returns and crude oil returns Abstract: The present research studies the relationship between the crude oil market and the stock market at aggregate level. Aggregate stock market indices would not reflect the complete story as the industrial base of each country could be significantly different. Consequently, in addition to several aggregate stock market indices, this study considers level one industry stock market indices for both United States and United Kingdom in order to capture industry specific responses to oil price shocks. This study evaluated the nature of time-varying correlation between the stock market and the crude oil market using Dynamic Conditional Correlation Generalised Autoregressive Conditional Heteroscedasticity (DCC-GARCH) model. Results from DCC-GARCH(1,1) model show evidence of volatility clustering and persistence in stock market returns and crude oil returns. The results also show that there is no dynamic conditional correlation in ARCH effects between stock market returns and crude oil returns. The results further show that there is strong evidence of time-varying volatility correlation between stock market and crude oil returns volatility. Moreover this study employs a bivariate BEKK (named after Baba-Engle-Kraft-Kroner)GARCH(1,1) model in order to study volatility spillovers between crude oil returns and stock market returns. The results show that volatility spillovers are present in a bidirectional way as the shocks from oil market to stock market are significant and found to be common as the shocks going from stock market to the oil market. Description: M.SC.BANK.&FIN.

2017-01-01T00:00:00Z https://www.um.edu.mt/library/oar/handle/123456789/40327 2019-02-23T02:27:45Z 2017-01-01T00:00:00Z

Title: The effects of regulations in the retail fund industry on retail investors Abstract: The thesis uniquely describes the effect of retail mutual fund regulation on investors. Focusing on the UCITS and US mutual fund regulations, the study tests the effectiveness of these regulations in context of the financial crisis along with the effects of the recent regulatory initiatives on the investors. The study uses the Fama-MacBeth regression method to find the risk premium of various risks, including the following: liquidity risk, default risk, emerging market risk, inflation risk, market risk, interest rate risk, and borrowing risk, which are transposed to the investor before, during, and after the crisis. The study concludes that the regulation undertaken after the financial crisis made the managers of both UCITS funds and US mutual funds reduce their risk exposures. The analysis proposes a case for deregulation, as it highlights that the Dodd-Frank Wall Street Reform and Consumer Protection Act made fund managers more exposed to tail risk. Similarly, the study tests the effects of UCITS V and discovers that retail funds reduced their tail risk after UCITS V was set in place. The thesis makes use of the value at risk, “VaR”, expected shortfall, “ES”, and standard deviation of residuals to define how the financial crisis affected the total, tail, and idiosyncratic risk, “IR” of retail global equity funds. The study discovers that before the financial crisis, retail mutual funds entailed more tail, total, and idiosyncratic risks. However, overall it can be gleaned that US mutual fund regulation provided a more effective response to new regulations, guidelines, and bailout programmes that aimed at reducing the risk levels. The study also tested whether the means return between the samples is identical. This section implied that different levels of risks do not necessarily imply different returns. This stems from the idea that while the risk levels between the pre-crisis period and at-crisis samples are identical to each other; however, the return of the UCITS funds in the pre-crisis sample is different from that in the at-crisis sample. The study compared the returns and alphas of the US and UCITS funds. The results indicate that in the pre-crisis period, the UCITS and US funds had divergent return levels, while the risk levels of the funds were identical. Namely, UCITS funds offered more return for the same mean risk as that offered by the US funds. This implies that the divergence of UCITS fund regulation was helping investors achieve better return for the same risk level in the pre-crisis period. After the financial crisis, these two separate funds experienced very similar risk and returns profiles. The paper thereby concludes that the regulations that were made after the crisis made this alignment possible. Finally, the analysis also raises concerns about the effectiveness of the restrictions, as the study finds that global equity funds were following the markets of ineligible assets. Description: M.SC.BANK.&FIN.

2017-01-01T00:00:00Z