Theses and Dissertations at Montana State University (MSU)
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Item Investing in a president(Montana State University - Bozeman, College of Agriculture, 2021) AlSaad, Faisal Khalid; Chairperson, Graduate Committee: Joseph AtwoodThis paper examined the 2012 presidential election between Barack Obama and Mitt Romney on the stock market. Presidential elections pose a political uncertainty that can be hedged using the stock market. The paper constructs three portfolios using three different weighting methods: equally weighted, market capital, and individuals' donations. This study uses Fama and French 5-Factor model to estimate the annual return for Obama's and Romney's portfolios. The results show that Obama's portfolio generates an annual expected return of 11.8%, 35.6%, and 39.5% for equally weighted, market capital and donation, respectively. The results also show that Romney's portfolio generates annual expected returns of 5%, 26.2%, and - 0.8% for equally weighted, market capital, and donation, respectively. Investors can adjust their investment portfolio position by observing the candidates' probability of winning the election. This paper establishes a stock market pattern before presidential elections that investors can capitalize on to ensure against the effects of political uncertainty upon the value of their investment portfolio.Item Does being nice have a price? : an investigation on socially responsible funds' performance(Montana State University - Bozeman, College of Agriculture, 2009) Omelyukh, Inna Vasylivna; Chairperson, Graduate Committee: James R. Brown.Are lower returns a cost of socially responsible investing? Financial theory presents opposing views on that account and empirical studies have yielded mixed results. This study evaluates the relative performance of socially responsible investment (SRI) mutual funds and tests whether the difference in financial performance of SRI funds and their benchmarks is related to the intensity of the screens and to the different types of screens employed by SRI funds. The results show that there is a curvilinear relationship between the number of exclusionary screens and fund performance, the use of environmental and alcohol screens is negatively related to fund performance, and the use of gambling and employment screens is positively related to fund performance.Item Cost : a possible explanation for risk premium?(Montana State University - Bozeman, College of Agriculture, 1995) Shen, Zhihua; Chairperson, Graduate Committee: Myles Watts.Transaction costs, information costs and defaults costs are suspected to partially explain differences in returns which were previously attributed to risk premiums in the financial markets. Two portfolios with identical costs are constructed from a Put, a Call, and underlying S&P 500 stocks, with the first Portfolio being hedged (Put-Call Parity) and the second Portfolio being unhedged (with systematic beta close to 2). The expected stock prices of S&P 500 were calculated based on 52-year historical data using several methods, and returns of the two portfolios were obtained and compared, using 935 observations of S&P 500 from January 2, 1992 through June 30, 1992. A linear regression model adjusted for cross-sectional heteroskedasticity and auto-correlation was used to estimate the expected risk premium rate. Transaction, information and default costs were statistically significant and estimated at 0.6% of value annually. These costs reduce the risk premium estimated by the Capital Asset Pricing Model.