Securities Pricing Model

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University of Bucharest – Economic Studies Academy

Faculty of International Business and Economics

Title: Security pricing model –

comparison of valuation models for two financial assets exotic emerging market

Nigeria and Qatar

First name:…………………..

Last name:………………….

Research Supervisor………………..

Bucharest , 2017

TABLE OF CONTENTS

Introduction……………………………………………………………………..3

TitleI. Research methodology and assumptions / objectives pursued…………………………………………………………………………….4

§Chapter 1.Formulas and definitions ……………………….10

§Chapter 2.Indicators……………………..…………………13

§Chapter 3. Years of past data regression, comparation included Romania…………………………………………………….18

TitleII. Research results ( how we capitalization conclusions

and achieve working hypotheses)…………………………29

Conclusion………………………………..…..……………..35

References ……………………………………………………………………..38

Security pricing model –

comparison of valuation models for two financial assets exotic emerging market:

Nigeria and Qatar

Title I. Introduction

The poestimation procedure is a very important issue in option price modeling. Without an appropriate estimation method,model risk still exists even if the model is correctly specified. Generally speaking, there are two different methods for parameter estimation for the given model: the first one is to apply econometric estimation methods (such as ML or GMM) to obtain the required estimates using historical data of the underlying security prices. One of the potential problems of this method, as noted by Bakshi et al (1997).

An positive case is Nigeria – lies in its robust long-term growth prospects that are underpinned by the combination of natural resources, an impending demographic dividend and an underpenetrated consumer market.

Qatar, meanwhile, is a strong macro story with limited external risk, the bank said, pointing to the economy's rising budget surplus thanks to its oil- and gas-related revenue. In addition, the Qatar stock market may experience a liquidity boost in the lead up to May, when the MSCI will reclassify the country as an emerging market from frontier market.

Title II. Research methodology and assumptions / objectives pursued

§1. Formulas and definitions

Stale Price is the current price of an asset that does not reflect recently revealed or other available information. The stale price is unlikely to remain stale as the market absorbs the information and reflects it in the price. Analysts disagree on how long this takes, as different versions of the efficient markets hypothesis state that the stale price either evaporates quickly, or does not exist at all.

Securities markets can be split into two levels. Primary markets, where new securities are issued and secondary markets where existing securities can be bought and sold. Secondary markets can further be split into organised exchanges, such stock exchanges and over-the-counter where individual parties come together and buy or sell securities directly. For securities holders knowing that a secondary market exists in which their securities may be sold and converted into cash increases the willingness of people to hold stocks and bonds and thus increases the ability of firms to issue securities.

There are a number of professional participants of a securities market and these include; brokerages, broker-dealers, market makers, investment managers, speculators as well as those providing the infrastructure, such as clearing houses and securities depositories.

Primary markets are basically the platform where an investor gets the first opportunity to purchase a new security. The group or company that issues the security gets the money by selling a certain amount of securities.

Normally, the entire process of buying a primary market security involves several rules and regulations that have to be properly adhered to before a security can change hands.

IPO or Initial Public Offering is one of the integral procedures of the primary markets. Through an IPO an organization announces the sale of its securities at a certain starting price.

Investors can obtain news of upcoming shares only in the primary market. The issuing firm collects money, which is then used to finance its operations or expand business, by selling its shares. Before selling a security on the primary market, the firm must fulfill all the requirements regarding the exchange.

After trading in the primary market, the security will then enter the secondary market, where numerous trades happen every day. The primary market accelerates the process of capital formation in a country’s economy.

Definition of 'Secondary Market: This is the market wherein the trading of securities is done. Secondary market consists of both equity as well as debt markets.

Description: Securities issued by a company for the first time are offered to the public in the primary market. Once the IPO is done and the stock is listed, they are traded in the secondary market. The main difference between the two is that in the primary market, an investor gets securities directly from the company through IPOs, while in the secondary market, one purchases securities from other investors willing to sell the same.

Equity shares, bonds, preference shares, treasury bills, debentures, etc. are some of the key products available in a secondary market. SEBI is the regulator of the same.

Among the world's least developed markets, HSBC has an exotic mix of markets that it is positive on this year, namely Argentina, Kazakhstan, Kenya, Nigeria, Oman, Qatar and Vietnam.

Kazakhstan, for example, is supported by a steady increase in domestic consumption and growing investment, the bank said, adding that the economy is closely tied to the global cycle and exhibits lower vulnerability to external shocks.

The positive case for Nigeria lies in its robust long-term growth prospects that are underpinned by the combination of natural resources, an impending demographic dividend and an underpenetrated consumer market.

Qatar, meanwhile, is a strong macro story with limited external risk, the bank said, pointing to the economy's rising budget surplus thanks to its oil- and gas-related revenue. In addition, the Qatar stock market may experience a liquidity boost in the lead up to May, when the MSCI will reclassify the country as an emerging market from frontier market.

Over-the-counter market, trading in stocks and bonds that does not take place on stock exchanges. It is most significant in the United States, where requirements for listing stocks on the exchanges are quite strict. It is often called the “off-board market” and sometimes the “unlisted market,” though the latter term is misleading because some securities so traded are listed on an exchange.

In the over-the-counter market, dealers frequently buy and sell for their own accounts and usually specialize in certain issues. Schedules of fees for buying and selling securities are not fixed, and dealers derive their profits from the markup of their selling price over the price they had paid. The investor may buy directly from dealers who are willing to sell stocks or bonds that they own or with a broker who will search the market for the best price.

Bonds of the U.S. government (“treasuries”), as well as many other bond issues and preferred-stock issues, are listed on the New York Stock Exchange but have their chief market over-the-counter. Other U.S. government obligations, as well as state and municipal bonds, are traded over-the-counter exclusively.

A third market has developed because of the increased importance of institutional investors, such as the mutual funds, who deal in large blocks of stock. Trading is done in shares listed on the exchanges but takes place over-the-counter; that permits large-quantity discounts not possible on the exchanges, where brokerage fees are fixed.

The capital asset pricing model (CAPM) of modern investment theory postulates the following relationship between the average rate of return of a security (common stock), measured over a certain period, and the volatility of the security, called the beta coeffi-cient (volatility is measure of risk):̄ Ri=α1+α2(βi)+ui(1)wherēRi=average rate of return of security iβi=true beta coefficient of security iui = stochastic disturbance term. The true βi is not directly observable but is measured as follows: rit=α1+β*rmt+et(2)

where rit=rate of return of security I for time trmt=market rate of return for time t(this rate is the rate of re-turn on some broad market index, such as the S&P index ofindustrial securities)et=residual term and where β*is an estimate of the “true” beta coefficient. In practice,therefore, instead of estimating (1), one estimates̄ Ri=α1+α2(β* i)+u.

The capital asset pricing model builds on the model of portfolio choice developed by Harry Markowitz (1959). In Markowitz’s model, an investor selects a portfolio at time

t1 that produces a stochastic return at t. The model assumes investors are risk averse and, when choosing among portfolios, they care only about the mean and variance of their one-period investment return. As a result, investors choose “ mean- variance-ef ficient ”portfolios, in the sense that the portfolios 1) minimize the variance of portfolio return, given expected return, and 2) maximize expected return, given variance. Thus, the Markowitz approach is often called a“ mean- variance model.”

Adding risk-free borrowing and lending turns the efficient set into a straight line. Consider a portfolio that invests the proportion x of portfolio funds in a risk-free security and 1x in some portfolio g. If all funds are invested in the risk-free security — that is, they are loaned at the risk-free rate of interest— the result is the point R fin Figure 1, a portfolio with zero variance and a risk-free rate of return. Combinations of risk-free lending and positive investment in g plot on the straight line between R f and g. Points to the right of g on the line represent borrowing at the risk-free rate, with the proceeds from the borrowing used to increase investment in portfolio g . In short, portfolios that combine risk-free lending or borrowing with some risky portfolio g plot along a straight line from Rf through g in Figure 1. Invest opportunities.

§2

2.1. Nigeria’s market- indicators

Nigeria, a Republic in West Africa also known as the Republic of Nigeria has a coast along the Atlantic Ocean on the Gulf of Guinea. The country takes its name from its chief river, the River Niger. Until 1991, the capital of the country was the largest city, Lagos, on the south-western coast; at the time, the city of Abuja, in the country’s interior, became its capital.

Nigeria has a federal form of government and is divided into 36 states and a federal capital territory. The country’s official name is the Federal Republic of Nigeria. Lagos, along the coast is the largest city and the country’s economic and cultural centre, but Abuja, a city in the interior planned and built during the 1970´s and 1980´s, is the capital. The government moved from Lagos to Abuja in 1991 in the hope of creating a national capital where none of the country’s ethnic groups would be dominant. The most dominant ethnic groups in Nigeria are; Hausa-Fulani, Igbo and Yoruba.

Nigeria covers an area of 923,768 sq km (356,669 sqmi). At its greatest expanse, it measures about 1,200 km (about 750 mi) from east to west about 1,050 km (about 650 mi) from north to south. Nigeria is bounded by Cameroon to the east, Chad to the northwest, Niger to the north, Benin to the west, and the gulf of Guinea on the Atlantic Ocean to the south.

The Central Bank of any country controls the financial activities of commercial banks in the following ways:

1.Open Market Operation: This involves the buying and selling of securities from and to commercial banks in order to increase and reduce the volume of money in circulation. If the central bank feels that the money in circulation is too small and wants to increase it, it will buy securities from commercial banks. By buying securities, it will increase the volume of money in the possession of the commercial banks and increase their ability to give more loans to members of the public, which will help to add more money in circulation. On the other hand, if the central bank feels that the amount of money in circulation is too much and wants to curtail it, it will sell securities to commercial banks. This will extract more money from commercial banks and at the same time reduce their lending powers and there by decreasing the amount of money in circulation in the country.

2.Bank Rate: This which is also called discount rate, is the rate of interest the central bank charges commercial banks and other financial institutions for discounting their bills. If the central bank feels like curtailing the lending powers of commercial banks and other financial institutions, it will raise its discount rate, which will force other rates to rise. If the rate of interest charged by commercial banks and other financial institutions is high because that of the central bank rate is high, it will make borrowing very exorbitant and will scare people away and the rate of lending will reduce. On the other hand, if the central bank lowers its discount rate, the lending rate of commercial banks and other financial institutions will also reduce. This will make borrowing cheaper and people will be attracted to borrow.

Following an April 2014 statistical "rebasing" exercise, Nigeria has emerged as Africa's largest economy, with 2015 GDP estimated at $1.1 trillion. Oil has been a dominant source of income and government revenues since the 1970s. Following the 2008-9 global financial crises, the banking sector was effectively recapitalized and regulation enhanced. Nigeria’s economic growth over the last five years has been driven by growth in agriculture, telecommunications, and services. Economic diversification and strong growth have not translated into a significant decline in poverty levels, however – over 62% of Nigeria's 170 million people still live in extreme poverty.

Despite its strong fundamentals, oil-rich Nigeria has been hobbled by inadequate power supply, lack of infrastructure, delays in the passage of legislative reforms, an inefficient property registration system, restrictive trade policies, an inconsistent regulatory environment, a slow and ineffective judicial system, unreliable dispute resolution mechanisms, insecurity, and pervasive corruption. Regulatory constraints and security risks have limited new investment in oil and natural gas, and Nigeria's oil production has contracted every year since 2012.

Because of lower oil prices, GDP growth in 2015 fell to around 3%, and government revenues declined, while the nonoil sector also contracted due to economic policy uncertainty. President BUHARI, elected in March 2015, has established a cabinet of economic ministers that includes several technocrats, and he has announced plans to increase transparency, diversify the economy away from oil, and improve fiscal management. The government is working to develop stronger public-private partnerships for roads, agriculture, and power. The medium-term outlook for Nigeria is positive, assuming oil output stabilizes and oil prices recover.

2.2. Qatar’s market

Saudi Arabia’s economy, the largest in the Middle East, expanded at a 5.9 percent average pace during the decade ended on December 31, up from 2.3 percent in the previous 10 years and faster than the global average of 3.8 percent, according to the International Monetary Fund.

Qatar will probably post the quickest growth in 2014 at 5 percent, while Saudi Arabia and the U.A.E. will both expand about 4 percent, according to the IMF.

Frontier markets were a more profitable place to invest in 2013 than emerging markets – a trend that’s likely to continue into 2014, analysts say. The MSCI Frontier Markets Index rose 21 percent in 2013, outpacing the MSCI Emerging Markets Index by 26 percentage points, the widest annual gap since 2005. Corporate earnings in the 26 countries that make up the frontier index have risen to the highest level in five years. Profits in the MSCI emerging index, which is dominated by Brazil, Russia, India and China, are still 11 percent below their 2011 high.

Global fund managers are expecting to earrn impressive returns from all Nigerian asset classes in 2017 as valuations remain low, underlying fundamentals hold strong and developed market institutional framework weaken.

A low-return outlook for traditional balanced portfolios of the fund managers has demanded that investors expand their toolkit to enhance growth potential, with emerging market (EM) equities presenting a potential opportunity given more attractive valuations and anticipated higher rates of economic growth than many developed countries .The Qatar Ministry of Finance has launched a new online program for this.

The tax law introduced a requirement for all entities registered in Qatar or with a permanent establishment in Qatar to withhold a percentage of certain payments

made to non-residents. This means that although the withholding tax liability falls on the non-resident with activities in Qatar without a permanent establishment, the withholding tax compliance requirement is borne by the Qatar entity. The applicable withholding tax rates are as follows:

5% of the gross amount of royalties and technical fees; and

7% of the gross amount of interest (some exclusions apply), commissions, brokerage fees, director’s fees, attendance fees, and any other payments for services carried out wholly or partly in the state.There is no withholding tax on dividends.

Businesses that are wholly or partially foreign (non-GCC) owned are required to submit audited financial statements signed by a locally registered auditor together with the tax

declaration to the QTD, if:

The capital of the taxable entity in Qatar exceeds

QAR100,000 ($27,390); or

The annual taxable income of the entity exceeds

QAR100,000 ($27,390); or

In the case of a branch, if the head office is situated

outside of Qatar.

Figure 2- Qatar GDP annual Growrate

A company that makes the payment to its foreign supplier is required to withhold the tax and remit to the tax department the funds that were withheld by the 16th day of the following month. It is also required to file a withholding tax statement to the QTD within the same deadline. In the event that the company does not make a tax payment or does not file a with holding tax statement to the tax department within the deadline, the company will be liable for a penalty equal to the amount of unpaid tax due, in addition to the withholding tax.

Circular No. 3/2011 dated 19 June 2011 confirmed that the requirement to withhold applies to all entities registered in the state of Qatar including government bodies, public authorities and corporations. The circular also includes an instruction for such entities to refrain from including conditions relating to exemption from income tax or the bearing of its burden by them (e.g. gross-up clauses) unless written approval from the Ministry of Economy and Finance is obtained.

The capital asset pricing model expressed as a recursive system. In a rather unusual application of recursive simultaneous-equation modeling, Cheng F. Lee and W. P. Lloyd estimated the following model for the oil industry:

R1t=α1+γ1Mt+u1tR2t=α2+β21R1t+γ2Mt+u2tR3t=α3+β31R1t+β32R2t+γ3Mt+u3tR4t=α4+β41R1t+β42R2t+β4+γ4Mt+u4tR5t=α5+β51R1t+β52R2t+β53R3t+β54R4t+γ5Mt+u5tR6t=α6+β61R1t+β62R2t+β63R3t+β64R4t+β65R5+γ6Mt+u6tR7t=α7+β71R1t+β72R2t+β73R3t+β74R4t+β75R5t+β76R6t+γ7Mt+u7t , whereR1=rate of return on security 1 (=Imperial Oil) R2=rate of return on security, 2 (=Sun Oil) R7=rate of return on security, 7 (=Standard of Indiana) Mt=rate of return on the market indexu t =disturbances (i=1,2,…, 7). Before we present the results, the obvious question is: How do we choose which is security 1, which is security 2, and so on? Lee and Lloyd answer this question purely empirically.

They regress the rate of return on security i on the rates of return of the remaining six securities and observe the resulting R2. Thus, there will be seven such regressions. Then they order the estimated R2 values, from the lowest to the highest. The security having the lowest R2 is designated as security 1 and the one having the highest R2is designated as 7. The idea behind this is intuitively simple.

If the R2 of the rate of return of, say, Imperial Oil, is lowest with respect to the other six securities, it would suggest that this security is affected least by the movements in the returns of the other securities. Therefore, the causal

ordering, if any, runs from this security to the others and there is no feedback from the other securities.

The slope coefficient, known as the beta coefficient, is a measure of the volatility of the security’s return. What the Lee–Lloyd regression results suggest is that there are significant intra- industry relationships between security returns, apart from the common market influence

represented by the market portfolio. Thus, Standard of Indiana’s return depends not only on the market rate of return but also on the rates of return on Shell Oil, Phillips Petroleum.

§3. Years of past data regression

comparation included Romania

Returns on Bucharest stock exchange: Empirical evidence we can report that two easily computed ratios, book-to-market equity and EPS/P have consistent explanatory power on stock returns on the Bucharest Stock Exchange. The results are in range with the findings of other empirical studies, which found the same two ratios to be important risk factors on other international capital markets. An easily constructed equal weighting selection model which considers the two factors can help achieve significantly better results than an index-tracking strategy. Unlike the significant influence that these two ratios have on stock returns, the cross-section regressions attest that beta shows no power to explain returns on the Romanian stock market, not even when used alone. Also, unlike the results of Fama and French (1992), financial leverage and company size have no impact on stock returns on the BSE. The two main relationships that we encountered, namely the positive impact of book-to-market equity and EPS/P on stock returns, together with the total lack of explanatory power of beta are proofs that the Capital Asset Pricing Model fails when applied to the Romanian stock market.

Authors have found two explanations to the empirical failure of the CAPM (see Fama and French, 2004). A first one is given by the behaviorists, who affirm that stocks with

high ratios of book value to market price are stocks of companies that have fallen on bad times, while low B/M ratios characterize growing firms. If an investor is sorting

firms on book-to-market ratios he will overreact to good and bad times. Because investors over-extrapolate past performance, this will lead to stock prices that are too

high for growth (low B/M) firms and too low for distressed (high B/M, so-called value) firms. Another explanation is based on the many unrealistic assumptions of the CAPM. Indeed, the assumption that beta constitutes the only risk factor of an asset is unreasonable. In reality, investors care about many variables, both macroeconomic and company-specific, and make their investment decisions accordingly.

This is why multifactor asset pricing models that identify and incorporate these priced factors (like in our paper) do a better job in explaining asset returns.

Sharpe (1964) and Lintner (1965) add two key assumptions to the Markowitz model to identify a portfolio that must be mean-variance-efficient. The first assumption iscomplete agreement: given market clearing asset prices att1, investors agree on the joint distribution of asset returns fromt 1to t. And this distribution is the true one—that is, it is the distribution from which the returns we use to test the model are drawn. The second assumption is that there is borrowing and lending at a risk-free rate, which is the same for all investors and does not depend on the amount borrowed or lent. In addition, the risk-free rate must be set (along with the prices of risky assets) to clear the market for risk-free borrowing and lending. In short, the CAPM assumptions imply that the market portfolio M must be on the minimum variance frontier if the asset market is to clear. This means that the algebraic relation that holds for any minimum variance portfolio must hold for the market portfolio.

For stocks, portfolios constructed to mimic risk factors related to size and BE/ME capture strong common variation in returns, no matter what else is in the time-series

regressions. This is evidence that size and book-to-market equity indeed proxy for sensitivity to common risk factors in stock returns. Moreover, for the stock portfolios we examine, the intercepts from three-factor regressions that include the excess market return and the mimicking returns for size and BE/ME factors are close to 0. Thus, a market factor and our

proxies for the risk factors related to size and book- to-market equity seem to do a good job explaining the cross-section of average stock returns.

The persistent negative abnormal returns of acquiring firms are a book-to-market effect.

We guess that acquiring firms tend to be successful firms that have high stock prices relative to book value and low E.F. Funu und K.R. French. Conmron rd flrcrors in srock and bond remm 55 loadings on HAIL. In our three-factor model, low loadings on HML would reduce the average stock returns of acquiring firms. and produce persistent negative abnormal returns in tests that adjust only for market and size factors.

Data and Sample Selection

Monthly stock price covering the period of January 2005 to April 2014 had been obtained from Data stream. The sample of this study includes all 40 Qatar firms that have been listed in Qatar stock exchange. The study uses monthly returns, firm size (ME), and the firm book-to-market ratio (BE/ME) for 40 Qatar firms. For the market index, the study uses the monthly returns of the Qatar Stock Exchange (QSE) market of Morgan Stanley Capital

International (MSCI) downloaded from Datastream. The study starts from January 2005 since the Datastream is a less comprehensive coverage of QSE stock prior to January 2005. The sample is collected of 112 monthly returns on each firm, on the market index, together with observations on the firm size and firm book-to-market ratio.

Lakonishok et al. (1994) (LSV) investigated the relative performance of value strategies and found that they outperform the market. In their study, the information on past growth in cash flow, sales and earnings was used to measure past performance, while multiples of price to current earnings and cash flow were used to measure expected performance. Their finding supported the result of Fama and French (1992) that value strategies provide high returns but they provided a different reason. Whilst Fama and French (1992) sought to explain the profitability of value strategies by arguing that these strategies were fundamentally riskier, Lakonishok et al. (1994) regard their profitability as being the result of stock miss pricings by other investors.

Figure 3.

An study uses returns from 110 stocks quoted on the Nigerian Stock Exchange (NSE) and they are included in the formation of the NSE Allshare Index for the period of January 2007 to February 2010. This index is designed to provide real-time measures of the NSE. All securities included in the indices are traded on the NSEon a continuous basis throughout the full NSE trading day. Each series consists of 166 observations of the weekly closing prices. The time period was chosen because it is characterized by intense return volatility with historically high and low returns for the NSE.

Theoretical framework and Literature Review used was

the CAPM is an integral part of the development of the modern capital market theory and is an off shoot of the

general equilibrium models of the determination of the prices of capital assets under conditions of uncertainty. Indeed, the seminal works of Markowitz (1952, 1959) on portfolio selection resulted in a revolution in the theory of finance and laid the foundation for modern capital market theory.

There are no market imperfections such as taxes,

regulations, or transaction costs. There are negligible restrictions on investment and no investor is large enough to affect the market price of the stock.

To test the CAPM hypothesis, the yield on the 1-month Nigerian Treasury Bills is used as an approximation of the risk-free rate (Rm) while the NSE Allshare index is taken as the best approximation for the market portfolio.

The basic equation used is rp= λ0 + λ1.βp+ εpt(Equation 1) where: λ0= the expected excess return on a zero beta portfolio and λ1 = the market price of risk, the difference between the expected rate of return on the market and a zero beta portfolio.

Since the CAPM indicates that the intercept is zero for every asset, an intercept is therefore added in the estimation of the SML to ascertain whether the CAPM holds true or not. In order to enhance the precision of the beta estimates, the securities were combined into portfolios to mitigate the statistical problems that arise from measurement errors in individual beta estimates. In addition, we combine the securities into portfolios to enhance the accuracy of the beta estimates and reduce the statistical problems that occur from measurement errors in individual beta estimates. According to the CAPM, the intercept (λ0)should be equal to zero when estimating SML. However, the intercept has a value less than zero (-1.784374). The table also indicates that the intercept of the SML (-1.784374) is less than the interest rate on risk free security of 0.0606. These results are obviously inconsistent with the zero beta version of the CAPM. Also, according to CAPM, the SML slope should equal the excess return on the market portfolio. The excess return on the market portfolio is -6.1943 while the estimated SML slope (as shown in table 3 below).is-3.932879. This in effect, invalidates the prediction of the CAPM.

In applying the CAPM to the Nigerian stock market, we employ weekly stock returns from 110 companies listed on the Nigerian Stock Exchange (NSE) from January 2007 to February 2010. In order to enhance the precision of the beta estimates and reduce the statistical problems that arise from measurement errors in individual beta estimates, the securities were combined into portfolios. The results generally invalidate the CAPM’s predictions that higher risk (beta) is associated with a higherlevel of return and that the intercept should be equal to zero when estimating SML. The claim by the CAPM that the SML slope should equal the excess return on the market portfolio is also not supported by this study. This in effect, invalidates the prediction of the CAPM as far as Nigeria is concerned.

Romania’s debt – to-GDPratio remains one of the lowest in the EU and CEE regions .General Government debt was 39,7% of GDP at end September 2014 and isforecasted to stay below 40% of GDP in the medium term As of 30 Sept 2014 ,Average remaining maturities of Government securities were:Total public debt-4.9yearsRONpapers-2.9yearsEurobonds-7.1years.

In 2010– is builded up a hard currency buffer in the treasury (to cover 4 monthsof gross funding needs) – buying protection while preserving flexibility

2011-2012-New regulation to support increased competitiveness among PDs – new set of appraisal criteria focusing on PDs performance on the primary and secondary market (underwriting commitment of 2 % of the total

Volume of government securities in the primary market auction and 3% including

The amounts acquired for clients, incentives : non – competitive auctions, favorable treatment for bond issuances on the foreign markets)

2013-Inclusionof Romanian benchmark bonds in international indices

(JP Morgan and Barclays) followed by sharp increase in the non – residents

Appetite to our domestic government bond market (May 2013– non –resident increased to 25 % of the total outstanding volume of government securities)

May 2014 – regaining the full investment grade status from all rating agencies

(the last in line – S&P’s upgrade Macroeconomic fundamentals supported rapid)

Market developments and a smooth implementation of the debt management strategy :Total outstanding local (end of September 2014) government securities R on 112 .2 bn (equiv.EUR24.9bn)-o/w: RON96.97 bn and RON 15 . 22 bn (EUR). Since 2011 yield curve moved gradually downwardly while the maturities were extended supported by the complementarity of the non -residents’ demand on the long – end of the curve:

As of September 2014 the domestic debt market continued being dominated by commercial banks , that held 53.1% in total outstanding government securities ; next in importance were the non residents with holdings that amounted to 19 . 4%, while pension funds` holdings reached 10.

Figure 4

.

In May 2016 the Financial Supervisory Authority released new regulation concerning securities lending operations and short selling by amending the Regulation on Financial Investment Services and the Regulation regarding the

use of the Global Accounts. The regulation was published in the Official Gazette on 3 June 2016. The new rules are as follows:Securities lending operations may be performed only for the following purposes:

to perform short selling transactions, including if the financial instruments are initially borrowed by intermediaries to be subsequently lent to their own clients in order to perform short selling transactions;

to perform operations in the margin account;

to complete the settlement of transactions, in the event that the intermediary providing custody services does not send the transfer order corresponding to the instruction for the settlement of an allocation transaction to the central depository;

to complete the settlement of the transactions, in the event that, on the settlement date, it is found that the financial instruments are not available for settlement (they are not transferred from the system of another central depository or of an international financial institution with which the central depository has established electronic links, by an instruction of transfer without change of ownership);

in the context of the market maker activities;

to perform settlement operations of the derivatives involving physical delivery;

in the context of exercising the role of an authorised participant of a tradable UCITS or of managing a tradable UCITS.

It is prohibited to borrow financial instruments exclusively to obtain dividends or to exercise votes in the general meetings of shareholders.

The intermediaries shall be responsible for the ongoing monitoring of the operations whereby financial instruments are lent and associated collateral established, in terms of compliance with the applicable legal provisions.

Title III. Results and an insight of the future vision uppon exotic market

Equation makes three statements about expected stock returns. First, fix everything in this equation except the current value of the stock, Mt, and the expected stock return, r. Then a lower value of Mt, or 3equivalently a higher book-to-market equity ratio, Bt/Mt, implies a higher expected return. Next, fix Mt and the values of everything in equation (3) except expected future earnings and the expected stock return. The equation then tells us that higher expected future earnings imply a higher expected return. Finally, for fixed values of Bt, Mt, and expected earnings, higher expected growth in book equity – investment – implies a lower expected return. The research challenge posed by (3) has been to identify empirical proxies for expected future earnings and expected investments. A recent paper by Novy-Marx (2012) identifies a proxy for expected profitability that is strongly related to average return. Aharoni, Grundy, and Zeng (2013) document a weaker but statistically reliable relation between investment and average return. (See also, Haugen and Baker 1996, Cohen, Gompers, and Vuolteenaho 2002, Fairfield, Whisenant, and Yohn 2003, Titman, Wei, and Xie 2004, Fama and French 2006, 2008.)

The financial crisis was triggered by a complex interplay of policies that encouraged home ownership, providing easier access to loans for subprime borrowers, overvaluation of bundled subprime mortgages based on the theory that housing prices would continue to escalate, questionable trading practices on behalf of both buyers and sellers, compensation structures that prioritize short-term deal flow over long-term value creation, and a lack of adequate capital holdings from banks and insurance companies to back the financial commitments they were making. Questions regarding bank solvency, declines in credit availability, and damaged investor confidence affected global stock markets, where securities suffered large losses during 2008 and early 2009. Economies worldwide slowed during this period, as credit tightened and international trade declined.[30] Governments and central banks responded with unprecedented fiscal stimulus, monetary policy expansion and institutional bailouts. In the US, Congress passed the American Recovery and Reinvestment Act of 2009.

The market price of bonds in the secondary market is often regarded as an indicator of the direct cost of raising such instrument. In addition to the secondary

market price, an issuer also pays a small ‘new issue premium’ in order to issue additional debt instrument and attract more investors.

The Bank should endeavor to balance the objective of price stability with banks profitability. This is because increased CRR is found to increase cost of funds and lowers. Profitability.Indirect cost of funds refers to other costs incurred by banks in the process of issuing debt.

These include fees paid for registration of bonds, insurance fees, rating agency fees, legal charges, among others. In the literature, expenses like overhead costs (salaries and wages), cost of providing security, handling funds, electricity bills and others are also classified as indirect costs (Nwaoba 2006; Accenture 2008). The literature also identified other indirect costs associated with covered bonds and mortgage-backed securities, such as, cost of the ‘in-built’ swaps.

Absence of water tariff and a water pricing system along with a lack of conservation awareness places Qatar as one of the highest water consuming countries in the world. Municipal water consumption per capita per day reached 500 L/ca.d for the year 2013. Dumping of sea to build new cities and construct towers makes the area very susceptible to salt water instruction, a phenomenon that does not only affect the groundwater aquifer system but also the construction materials and building deformations.

In Qatar, real GDP increased at a lesser rate in 2012 compared to the previous years. But if we take into account low growth in the oil sector, then we can see that achieving this growth rate in GDP required a growth rate of up to 10% in the non-oil sector and this is not an easy achievement. This is what must be done to diversify the structure of the Qatari economy, with the participation of the private sector, and encourage private initiatives that can identify potential market needs. In addition, the rate of growth achieved in 2012 is also considered a remarkable rate when compared to growth rates for the same year with a number of economic groups. It is twice the global growth rate, and five times the growth rate in developed countries. Maintaining good annual growth rates in the coming years is considered a major challenge in light of the expected decline in growth rates in the hydrocarbons sector. This requires doubling our efforts to increase productivity, improving economic and technical efficiency, promoting economic diversification, encouraging entrepreneurship, expanding research and development, and moving towards a knowledge-based economy. This is exactly what we are working to achieve in the next phase.

Real growth in GDP is coupled with other indicators that reflect the strength of Qatar’s economy, namely that government expenditure in the public budget for the 2013/14 fiscal year is higher than spending in any previous budget and higher than spending in the 2012/13 fiscal year by 17%. This increase has come in a timely manner to compensate for less growth in the oil sector, and to continue the fiscal stimulus and the need for spending on the priorities of the National Development Strategy 2011-16.

The Qatar National Development Strategy 2011-2016 was prepared to set a path towards achieving the goals of Qatar National Vision 2030. Qatar’s National Vision helps build a bridge from the present to the future. This should help transform Qatar into an advanced country, sustaining its development, and providing a high standard of living for its people.

•

The broad Qatar National Development Strategy integrates a number of sector-specific strategies aligned to Qatar National Vision 2030.

The Qatar Statistics Authority stated that the population grew

by 9.5% during the period from March 2014 to March 2015.

• Growth in population created a lot of jobs in the non-hydrocarbon sectors, which also resulted in an increase in demand for family accommodation, especially four and five bedroom villas. Currently occupancy rates are high according to DTZ’s Q1 2015 report.

• Colliers International estimated that the number of housing units will exceed 129,200 by the end of 2014 and an additional 8,200 units were expected to enter the market between 2015–2018.

Despite annual increases in supply, high population growth

rates are expected to result in an undersupplied market. Supply scarcity in Doha’s housing market offers a strong foundation.

• Average rental rates in Doha increased over the last three years, increasing by 14% in 2014 according to Colliers International.

• Housing affordability is becoming an issue.

• The real estate sector was robust following heavy investment in infrastructure and property development. The new metro in Doha is one of the major infrastructure projects and some of the real estate development projects include Musheireb and Lusail City.

Title IV. Conclusion

We show that, in some special cases characterized by a small float of the asset relative to the demands for shorting and for buying the asset, a large discrepancy between the beliefs of optimists and pessimists regarding the company's value, or high lender bargaining power | that the e ect can be strong enough to push the price of the asset above the valuation of the most optimistic among investors. An implication is that a project may, under conditions, be nanced by issuing a lendable traded security, even though everyone thinks that it has a negative net present value. Further, the results shows that the common wisdom, that easier access to shorting reduces the price, need not be true. We also illustrate how negative stub values. While this paper concentrates on the price behavior of recently ofered equities, the results may be reinterpreted in the context of repo specials and the valuation of corporate and government bonds, and in the context of convenience yields and the valuation of commodities.. One could easily extend our model to incorporate partial information revelation over time, the updating (and perhaps convergence) of beliefs, new agents arriving over time, disagreement among agents over the implications of new pieces of information, and fluctuations in the float and in the ease with which agents of various types are located.

Other potential extensions could allow for private information (for example concerning some market characteristics), for hedging motives to short.

Productivity growth has been a particular focus of MGI research over the past 25 years. It is an essential driver of long-term economic growth and national wealth.

Given the structure of Saudi Arabia’s labor market, with its heavy reliance on low-wage, low-skilled migrant labor, the Kingdom’s productivity record is poor compared with that of many other countries. Average annual productivity growth overall during the 2003–13 oil boom was just 0.8 percent, the second lowest among the G20 emerging economies, just ahead of Mexico (0.5 percent), but far behind leaders China (9.6 percent), India (5.3 percent), and Nigeria (4.3 percent). In relation to the United States, the world productivity leader, Saudi Arabia’s productivity actually fell further behind rather than catching up.

The problem of monopolist middle-men, of law and order, of comunication, currency and banking, of forestry protection- all these were urgent and basics problems of the moment throught their solutions had great signifiance for the future economic development of Southern Nigeria. The problems of the strenght of the economy of Southern Nigeria regarding the outside world , in particular the subsequent problem of competition in the oil palm and rubber industries- these were future problems. At the time the pressing need was to harvest and market what already existed. More is to be praised for appreciating this fact in spite of the pressure from big finance for extensiveexperimentation on exotic produce.

After the successful implementation of the policy of ,, supervision and control‘‘ of the existing industries such as rubber and palm produce , the next stage should be ,, scientific ands expanded cultivation’’ of these and other cash crops. It is these men who should more properly bear the blame for failure to recognision the place of modern plantation in agricultural development.

It is likely than without pressure from business interests in Britain , Moor would have carried out his proposed plan for experimenting with cotton , tabacco, coffe and cocoa throught peasant enterprise. This would have been preceded by a soil survery and failure here would have been less spectacular than the subsequent collapse of the hight hopes inspired by the adventurist experimentation at Nikissi.

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