Emerging Markets Finance

Certificates (or "Scheine")

You can collect your "Schein" at the beginning/mid of February from Frau Nacca at the Institute of Finance's secretariat.

Organisational matters

Where? Villa Eberhardt, Ulm, Heidenheimer Str. 80
When? Monday & Tuesday, 25th & 26th of January 2010
Submission of papers? Until 18th of January 2010
What to hand in? Please hand in as a printout and send your final version of the paper (PDF) to your supervisor.
Hints for seminar work? Guidelines

Topics

For each topic, you should provide a literature survey (here you should consider more than your intro-paper) and you will also have to work on a practical part in which you should get familiar with empirical analysis (accessing data over Datastream or Bloomberg, performing quantitative analyses)

1. Effects of Financial Globalization on Emerging Markets

   Review the literature on the effects of financial globalization on emerging markets.
   
   Practical part: Perform your own empirical study, e.g. update the previous study.
   Intro-paper: Prasad, Rogoff, Wei, Kose (2003): "Effects of financial globalization on developing countries: some empirical evidence", IMF Working Paper
   Supervisor: Jürgen Bohrmann
   Students: Michael Gorodinski, Laurent Ruggiu

2. Corporate Governance in Emerging Markets

   Review the literature on corporate governance in emerging markets. You can focus on areas like tunneling.
   
   Practical part: Perform your own empirical study, e.g. examine the links between corporate governance ratings and returns.
   Intro-papers:
   Atanasov et al. (2007): "How does law affect finance? An examination of equity tunneling in Bulgaria", Journal of Financial Economics
   Gottesman et al. (2008): "Does better corporate governance result in higher valuations in emerging markets? Another examination using a new dataset", Working Paper
   Supervisor: Gunter Löffler
   Students: Nataliya Khovayeva, Veselin Poryazov

3. Behavioral Finance in Emerging Markets

   Review the literature on behavioral finance in emerging markets. Focus on papers in which special characteristics of emerging markets (e.g. culture) play an important role.
   
   Practical part: Perform your own empirical study, e.g. update a previous study.
   Intro-paper: Brown, Mitchell (2008): "Culture and stock price clustering: Evidence from the Peoples' Republic of China", Pacific-Basin Finance Journal, Vol. 16, pp. 95-120
   Supervisor: Thomas Verchow
   Students: Gongchen Wang, Christoph Hirt

4. Sovereign Credit Ratings in Emerging Markets

   Review the literature on the determinants of sovereign credit ratings.
   
   Practical part: Perform your own empirical study, e.g. update a previous study.
   Intro-paper: Cantor, Packer (1996): "Determinants and impact of sovereign credit ratings", FRBNY Economic Policy Review, October Edition
   Supervisor: Gunter Löffler
   Students: Fang Yang, Ivan Samoylov

5. Size and Value Effects in Emerging Markets

   Review the literature on size and value effects in emerging markets.
   
   Practical part: Perform your own empirical study, e.g. update a previous study.
   Intro-paper: Barry (2002): "Robustness of size and value effects in emerging equity markets 1985-2000", Emerging Markets Review, March Edition, Vol. 3, Issue 1, pp. 1-30
   Supervisor: Alina Maurer
   Students: Jiaming Xue, Roman Scholze

6. Estimating the Cost of Capital in Emerging Markets

   Discuss the usability of the CAPM for estimating the cost of capital in emerging markets and discuss alternative approaches.
   
   Practical part: Analyze stock returns in emerging markets using the alternative D-CAPM approach.
   Intro-papers:
   Estrada (2000): "The cost of equity in emerging markets: a downside risk approach", Emerging Markets Quarterly, Vol. 4, pp. 9-30
   Estrada (2002): "Systematic risk in emerging markets: the D-CAPM", Emerging Markets Review, Vol. 3, pp. 365-379
   Supervisor: Alina Maurer
   Students: Rahmonjon Kayumov, Yimin Hua

7. The Development of Idiosyncratic Risk Over Time in Emerging Markets

   Review literature and investigate whether there is a historical rise of idiosyncratic risk in developed or emerging markets.
   
   Practical part: Analyze the development of idiosyncratic risk in stock markets for emerging and already developed markets up to 2008.
   Intro-papers:
   Campbell et al. (2001): "Have individual stocks become more volatile? An empirical exploration of idiosyncratic risk", Journal of Finance
   Angelidis (2008): "Idiosyncratic risk in emerging markets", Working Paper
   Supervisor: Jürgen Bohrmann
   Student: Keiichi Ozawa

8. Do Investments in Emerging Market Stocks Outperform Those in Developed Markets

   Review literature and investigate whether there is robust evidence that stock investments in emerging markets outperform those in already developed markets. Do investment or hedge funds generate a larger alpha in emerging markets than in developed markets? If yes, what might be the reasons?
   
   Practical part: Analyze the performance of selected emerging stock markets (index or fund-level) and compare it to developed markets performance.
   Intro-papers:
   Henry (2000): "Stock market liberalization, economic reform, and emerging market equity prices", Journal of Finance 55
   Estrada (2008): "Black swans in emerging markets", Working Paper
   Supervisor: Thomas Verchow
   Students: Thomas Woznik, David Scharenberg

9. Non-Normal Stock Returns and Portfolio Diversification in Emerging Markets

   Review literature and investigate whether stock returns in emerging markets are in any sense abnormal. Also, do emerging markets offer special diversification benefits?
   
   Practical part: Analyze the stock return distributions of selected emerging markets. You can also calculate correlations between emerging market returns and world market returns.
   Intro-papers:
   Susmel (2002): "Extreme observations and diversification in Latin American emerging equity markets", Journal of International Money and Finance
   Harvey (1995): "Predictable risk and returns in emerging markets", Review of Financial Studies
   Supervisor: Jürgen Bohrmann
   Students: Markus Rauscher, Manuel Träger

10. Bank Vulnerability in Emerging Markets

    Review literature and discuss the approach of the distance-to-default measure based on the Merton model. Do research on the banking landscape in emerging market countries and try to uncover vulnerabilities in the banking sector.
    
    Practical part: Analyze the distance-to-default measure for the top-5-banks in selected emerging market countries in order to unveil banking vulnerabilities.
    Intro-paper: Chan-Lau et al. (2004): "An option-based approach to bank vulnerabilities in emerging markets", IMF Working Paper
    Supervisor: Jürgen Bohrmann
    Students: Zhang Ying, Fan Shiyuan

11. Influence of Political Risk on Stock Returns in Emerging Markets

    Review literature and discuss the influence of political risk on international portfolio allocation decisions and stock returns in emerging markets.
    
    Practical part: Analyze stock returns in emerging markets and factor out the influence of political risk via proxies. You could also do such an analysis on the portfolio allocation level.
    Intro-paper: Bilson, Brailsford, Hooper (2001): "The explanatory power of political risk in emerging markets", Working Paper
    Supervisor: Gunter Löffler
    Students: Anna Ivanova, Alexey Indiryakov