02. Master's Thesis
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Item Restricted TESTING THE NO-ARBITRAGE PARITY CONDITIONS FOR BITCOIN SPOT AND FUTURES PRICES(Nazarbayev University Graduate School of Business, 2023) Seifulov, ZhaxylykThe study investigates the no-arbitrage parity conditions in Bitcoin spot and futures markets, focusing on the efficiency of the spot-futures (SFP) and futures spread parity (FSP) models in estimating the Bitcoin futures prices. Utilizing data from the Chicago Mercantile Exchange (CME) and Binance exchange, the research analyzes the relationship between spot and futures prices of Bitcoin, moreover, examines the relationship between intramarket Bitcoin futures contracts. The study finds that the mean pricing error of SFP is greater than FSP, indicating the greater efficiency of FSP in pricing Bitcoin futures. It also explores arbitrage opportunities by testing the equality of means of the bid-ask spread and mispricing, revealing that arbitrage opportunities are not consistently present. Few exploitable arbitrage opportunities in bullish markets are found, but overall, the arbitrage profit is not feasible when considering the costs such as bid-ask spread.Item Open Access STATE OWNERSHIP AND COMPANY PERFORMANCE IN KAZAKHSTAN(Nazarbayev University Graduate School of Business, 2023) Seidazov, BalislamState ownership and its effects on firm performance have been researched widely across many countries and time periods, however, the results of these research endeavours have been mixed. While in some cases the relationship between state ownership and firm efficiency has been negative, in others it could be positive or even non-linear, having a U-shape. State ownership can be negatively correlated with firm performance, possibly because their objectives can differ from solely operating on high profit, some of them can be less profitable, yet, still efficient in their main mission. For instance, several studies mention that state ownership can have a negative effect on firm performance as these firms do not prioritize maximization of profits (dodonov, china1, ru1, oecd2017), instead they carry policy burdens and provide communal services (china1). On the other hand, state owned enterprises can take advantage of their closer ties to the government and its resources, which would make state ownership positively related to firm performance. According to several studies government ownership’s effect on firm effectiveness can be positive, because of their ability to access state owned capital (oecd, ru1) which would give them comparative advantage over privately held firms. Finally, there is an opinion which partially agrees with both sides and combines the two. A study titled “State ownership and firm performance: Empirical evidence from Chinese listed companies” by Mei Yu of the Birmingham City University, state ownership and firm performance have a U-shaped relationship (China2 84). RU1 also offers a similar opinion of the possibility of U-shaped and inverted U-shaped relationships between state ownership and firm performance.Item Restricted BUSINESS CYCLE AND GAS PRICES(Nazarbayev University Graduate School of Business, 2023) Kabkenova, ShahizadaThe theory of storage is essential for the prediction of spot and forward price changes. The research analyzes the theory through a stable energy source - natural gas. The hypothesis of the theory of storage implies that during low inventory, the current price is more volatile than future prices, while during high inventory periods, prices change equally. Moreover, spot prices greatly affect futures during high inventory periods. The theory also observes the negative relationship between inventory and the business cycle. This means that during business cycle peaks, inventory is low which causes an increase in prices. Current research observed the direct and indirect test of inventory to support the storage theory. The results for natural gas in the analysis of both approaches of inventory support the theory, while the business cycle has a minor effect on the prediction of prices..Item Restricted THE IMPACT OF OIL PRICE SHOCK ON AN OIL-EXPORTING SMALL ECONOMY: A CASE STUDY OF KAZAKHSTAN(Nazarbayev University Graduate School of Business, 2023) Aimanbetova, SaniyaThis study investigates the economic impact of external oil price shock on an oil exporting small economy in the case of Kazakhstan. The analysis is conducted using the SVAR model. Monthly data is used including the period from 1 January 1999 till 1 May 2023. The study demonstrates that an oil-exporting small country, such as Kazakhstan, is affected by global fluctuations in oil prices. The findings indicate that a rise in oil prices has a negative impact on the trade balance, leading to an immediate increase in the subsequent months. The real effective exchange rate exhibits occasional fluctuations but normally remains within a narrow range. Inflation experiences an initial rise during the first period (the impact period), followed by a subsequent decrease within a span of 5 months. The industrial production index exhibits a more prominent reaction to the oil price shock after a certain period of time, suggesting that fluctuations in oil prices may have a delayed impact on industrial production index.Item Restricted THE THEORY OF STORAGE IN THE PETROLEUM PRODUCTS FUTURES MARKET(Nazarbayev University Graduate School of Business, 2023) Kuttymuratova, NuriyaThe energy product markets exhibit significant price and inventory volatility. Some of these fluctuations are unpredictable, prompting market participants to employ futures contracts and inventories as tools for risk mitigation. For instance, there was a notable and unprecedented event in the oil markets in April 2020 when oil prices briefly turned negative due to substantial decrease in global oil demand: the West Texas Intermediate (WTI) crude oil futures for May delivery experienced a historic drop, closing at approximately - $37.63 per barrel(Reed and Krauss, 2021). Consequently, the spread between futures and spot prices, known as the basis, serves as a crucial indicator of setting the efficient hedging strategy, and deciding the time when to sell or buy in oil futures markets...Item Open Access INFLATION TARGETING IN KAZAKHSTAN(Nazarbayev University Graduate School of Business, 2023) Mukhitdinov, MurajanThis Master's thesis is dedicated to a comprehensive exploration of inflation targeting in Kazakhstan, with a specific focus on its applicability within the country's economic framework. Through a meticulous analysis of the factors influencing inflation targeting and its effectiveness, this research seeks to enhance our understanding of monetary policy frameworks and their impact on macroeconomic stability in Kazakhstan. The study delves into the theoretical foundations, empirical efficacy, and unique challenges associated with implementing inflation targeting in the Kazakhstani context, giving special attention to the crucial role of the National Bank of Kazakhstan. Drawing from a diverse range of empirical studies, the thesis underscores potential benefits, including the reduction of inflation rates and heightened transparency in monetary policy. Employing rigorous case studies and empirical analysis, the research emphasizes inflation targeting's positive impact on macroeconomic outcomes, providing crucial insights for successful implementation. Furthermore, the thesis introduces a method for determining the optimal inflation target for Kazakhstan, utilizing the framework proposed by Ball and Sheridan (2005), highlighting the feasibility of estimating a positive inflation target based on accessible data..Item Restricted MONETARY POLICY TRANSMISSION MECHANISM IN KAZAKHSTAN(Nazarbayev University Graduate School of Business, 2023) Sagdiyev, IlyasThe study of monetary transmission mechanisms remains a critical area of inquiry in understanding how monetary policy decisions influence an economy. This is particularly relevant for countries like Kazakhstan, where the interplay between policy and economic variables shapes the broader economic landscape. This thesis explores the monetary transmission mechanism in Kazakhstan using a Vector Autoregression (VAR) approach, focusing on monthly data spanning from January 2016 to September 2023. This period encapsulates significant economic shifts, including the transition to inflation targeting regime, the fluctuations in oil prices, changes in global economic conditions, and the country's evolving monetary policy landscape..Item Restricted TESTING THE PURCHASING POWER PARITY THEORY: THE EXCHANGE RATES MOVEMENT IN KAZAKHSTAN.(Nazarbayev University Graduate School of Business, 2023) Yerekenov, ChingizPurchasing Power Parity, or PPP, is an important concept that has several applications in economics and finance. According to Purchasing Power Parity theory, the exchange rates should adjust accordingly with the prices of similar goods in different countries to account for inflation. To put it in simpler terms, a certain basket of goods should be roughly of the same availability in terms of one currency, as well as in terms of another currency...Item Embargo TESTING THE LAW OF ONE PRICE(Nazarbayev University Graduate School of Business, 2023) Syratay, AssylzatIn the realm of international economics, the Law of One Price (LOOP) stands as a foundational concept that underpins our understanding of global trade and market integration. LOOP posits that identical goods should command the same price in different markets, irrespective of geographic boundaries or political jurisdictions (CFI Team, n.d.). Its implications extend beyond economic theory, shaping trade policies and impacting the decisions of businesses and governments worldwide...Item Restricted FIRM PERFORMANCE AFTER CURRENCY SWING IN TURKEY(Nazarbayev University Graduate School of Business, 2023) Khairashov, ShamilA currency swing is a large fluctuation in exchange rates, usually due to unexpected market event. Sharp currency swings take place quite often in currency markets. They are a normal feature of the flexible exchange rate system. It usually illustrates the need for hedging solutions in order to protect companies’ profit from sudden moves. For the past few years Turkey is one of the countries, which has been suffering from currency swing. It affects inflation rate in the country where the prices for goods and minimum wage has to be reconsidered quite often. It is quite important to note that the currency crisis historically had been quote an issue in Turkey, which had undergone the denomination of the currency. The main aim of this thesis to identify the extent to which currency swing affect the return on capital employed, solvency ratio, current ratio, operating revenue, cash flow, EBIT, EBITDA, gross margin, net income, total assets, shareholder assets, profit margin, profit before tax and return on asset of the selected companies. The research findings revealed that the impact of the exchange rate volatility after currency swing on financial metrics of the firms were insignificant. However, the measures on cash flow and gross margin had shown significant results, precisely being predicted by the independent variables of interest rate and the exchange rate.Item Restricted CENTRAL BANK TEXT SHOCKS, MONETARY SURPRISES, AND INFLATION EXPECTATIONS IN KAZAKHSTAN(Nazarbayev University Graduate School of Business, 2023) Zholdas, Sanzhar; Sharif, AneliyaThis paper explores whether press releases of the National Bank of Kazakhstan (NBK) contain valuable information and what is its effect on market expectations. We modified the method of Romer and Romer (2004) by including the word sentiments from the press releases to the ridge regression. The residuals of that ridge regression are considered as monetary policy shocks. We were able to increase the fit of the ridge regression, which means that press releases include information beyond those incorporated by the forecasts of the NBK only. In addition, we found that impulse response functions show that the effect of monetary policy shocks on the macroeconomic variables is not significant, although in line with the theory. To examine the effect of press releases on the market expectations we used TFIDF text analysis (Handlan, 2022) and the month forward yields on government bonds. We found that the effect of English language press releases is not significant while that of the Russian language press releases is significant. The model seems to have a better fit with Russian language press releases overall. These findings suggest that the NBK audience is more receptive to communication in Russian rather than in English.Item Restricted PRICING RESIDENTIAL REAL ESTATE IN URBAN AREAS OF KAZAKHSTAN(Nazarbayev University Graduate School of Business, 2023) Makishev, Dauren; Akhmet, AlisherReal estate market is the basis of any economy in the world, as housing in this case is one of the most important or rather basic needs for any human in the world. Proceeding with the analysis of the real estate market with the thorough empirical study is usually made with a precaution of a classical idea and scheme - introducing relevant or classical problem/topic, looking at the researches done by other authors in previous years regarding this topic, explaining and expanding on the data used in the paper/article/research with further discussion of methodology, results and conclusions with possible evaluation and implications beforehand. However, this research as primitive and timeless its topic seems to be except for the use of the relevant methodologies and filling necessary gaps in existing literature about real estate pricing in Kazakhstan is not aimed at not just writing another empirical paper - but making a paper that will be worth thinking upon, promoting further research and delving not only in empirical reasonings behind the real estate market pricing used in other works - but looking at the concept of real estate as a full with some historical remarks and notes, that may be useful and can be discussed as well...Item Open Access EXCHANGE RATES AND PURCHASING POWER PARITY: A COMPARATIVE STUDY OF CIS REGION COUNTRIES AND MAJOR GLOBAL ECONOMIES WITH A FOCUS ON KAZAKHSTAN(Nazarbayev University Graduate School of Business, 2023) Abenova, Ainur; Amantay, DanaThe relationship between exchange rates and Purchasing Power Parity (PPP) is one of the important factors to consider in international economics since it can influence trade relationships, economic policies, and global financial stability. On the other hand, PPP, a foundational theory of economics, states that in the long run, the ratio of two currencies' price levels should be reflected in the exchange rate between them (Arize et al., 2015b). Changes in exchange rates may have a considerable effect on the economic health of a country since they can influence the competitiveness of exports, inflation, and capital flows. Consequently, it is of the utmost importance for governments, businesses, and investors to understand the behavior and determinants of exchange rates, as it has a direct impact on the cost of imports and exports (Brillembourg, 1977).Item Open Access TESTING THE UNBIASED EXPECTATIONS HYPOTHESIS(Nazarbayev University Graduate School of Business, 2023) Sabyrzhanov, Damir; Mussin, MaxatThe complex relationship between exchange rates and interest rates has long attracted the interest of academic researchers and practitioners in the financial world, generating extensive research and practical discussions. This multifaceted interaction is of utmost importance, affecting a wide range of individuals and organizations, from individual investors trying to navigate turbulent forex markets, to policymakers carefully crafting monetary policy, to global economists trying to decipher macroeconomic trends. The focus of this discussion is the unbiased expectations hypothesis (UEH), an influential theory that posits a direct correlation between expected exchange rate movements and the different interest rates observed in different countries..Item Open Access DO FUNDAMENTAL INDEXES PRODUCE HIGHER RISK-ADJUSTED RETURNS THAN MARKET CAP INDEXES? EVIDENCE FOR CHINESE STOCK MARKET(Nazarbayev University Graduate School of Business, 2023) Bizhanova, Madina; Gabayev, AskerThe proponents of fundamental indexing (‘FI’) theorize that a traditional value weighted portfolio is characterized by a return drag due to overweighting overvalued stocks and underweighting undervalued stocks. A number of empirical studies found an extra return for an FI strategy compared to a value weighted benchmark. However, the critics argue that the primary driver of FI’s superior performances reflects not the drag avoided but a style shift towards value strategy. Hence the analytical comparison of an FI alternative should control for a style shift when testing for the drag effect. The 2018 study of an FI strategy for the U.S. stock market by De Moor, Liu & Sercu employs a vigintile portfolio analysis to control for style shift and do not find any economically or statistically significant benefit from drag avoidance. I employ the conventional factor analysis and the proposed double-sorted bucket analysis to test the FI strategy using Chinese stock market data. Like others before, I conclude that the FI’s extra return is primarily due to its value bias rather than avoidance of the drag effect.Item Open Access VAR AND EXPECTED SHORTFALL IN FOREIGN EXCHANGE RISK MANAGEMENT IN KAZAKHSTAN VARIOUS MODELS’ FORECASTING PERFORMANCE EVALUATION(Nazarbayev University Graduate School of Business, 2023) Kurmanbek, Dina; Oglanbek, ArnurThe thesis paper assesses methodologies, including Historical Simulation, Parametric Approach, ARMA-GARCH, and ARMA-GJR-GARCH, for quantifying Value at Risk and Expected Shortfall in currency pairs involving the Kazakhstani tenge. Both Parametric and GARCH-type models assume Normal Distribution, Student's t distribution, and Skewed Student's t distribution. Comprehensive analysis revealed no universally superior model; each exhibited distinct strengths and weaknesses, complicating the identification of an optimal risk measurement approach. Additionally, it is observed that the GJR-GARCH model does not consistently outperform the GARCH model, despite its extension to incorporate asymmetric volatility. GARCH-type models that assume skewed Student’s t distributions and Student’s t distributions for the residuals, demonstrated favorable outcomes for currency pairs originating from developed markets. Additionally, models exhibited improved predictions for currency pairs from developed countries during periods of floating exchange rate adoption. In contrast, more accurate results were observed for currencies of emerging countries in the period spanning 2009 to 2015Item Restricted EARNINGS MANAGEMENT AND STOCK RETURN PREDICTABILITY: EVIDENCE FROM KAZAKHSTAN(Nazarbayev University Graduate School of Business, 2023) Yeleussizova, Aigerim; Kassymbekova, AigerimFor investors, board of directors and other stakeholders, earnings appear to be one of the most important items in financial statements (Burgstahler and Dichev, 1997). Investments in the firms’ securities are most often based on the financial position and performance of the firm as reflected in financial statements. This may incentivize managers to manage the reported earnings, creating a favorable image of the company. Healy and Wahlen (1999) define earnings management as managers intentionally altering reported earnings with the intent of affecting stakeholders’ view of the financial position and/or performance of the firm.Item Restricted SEASONALITY EFFECTS IN KAZAKHSTAN STOCK EXCHANGE (KASE) INDEX(Nazarbayev University, Graduate School of Business, 2021-02-11) Mutkarim, Assem; Nursalim, Madina; Orumbayeva, SaraWe investigate whether there exist seasonal anomalies in the Kaza- khstan Stock Exchange (KASE) index. We focus on two well-known ef- fects in capital markets: day-of-the-week and month-of-the-year e ects af- ter controlling macroeconomic variables, crisis periods, and world market movement. Moreover, we construct the KASE Total Return index to con- sider dividends as a potential cause of seasonality in the index returns. The empirical evidence indicates that there are negative Monday and pos- itive Friday e ects in KASE index. However, the negative Monday e ect might result from a decrease in prices on ex-dividend dates. The positive Friday e ect can be explained by investors' sentiments before the holidays. We nd no month-of-the-year e ect in the KASE index. Since there is no prior research on seasonality in the local market, our study reveals notable results and initiates a discussion on this topic.Item Restricted FORECASTING INFLATION RATE OF KAZAKHSTAN BASED ON THE CONSUMER PRICE INDEX, CONSIDERING THE IMPACT OF SEASONALITY(Nazarbayev University, Graduate School of Business, 2021-02-11) Zhumatayeva, Madina; Kussainov, Arsen; Yelyubayeva, ArayThe purpose of this work is to study and compare existing models and methods, and build an optimal model for forecasting inflation in Kazakhstan, taking into account seasonal adjustment of CPI. This paper compares the performance of two seasonal adjustment methods, TRAMO-SEATS and X-13-ARIMA-SEATS. Based on the results of seasonal adjustment, the X-13-ARIMA-SEATS method detects more outliers than the TRAMO-SEATS method; however, the difference in the seasonally adjusted time series is negligible. Thus, further comparison of these two methods is conducted based on the result analysis of the forecast models. To forecast the inflation rate, two models are used - the ARIMA-GARCH model, and the VAR model. The out-of-sample forecast is made for a short-term period of six months from June 2019 to December 2019. Based on the error measures in the validation period the most adequate and accurate model is the VAR(2) model with CPI seasonally adjusted by the X-13-ARIMA-SEATS method.Item Restricted USE OF OPTIONS TO INCREASE AND REDUCE VOLATILITY IN THE MARKET PORTFOLIO BASED ON PAST VOLATILITY(Nazarbayev University, Graduate School of Business, 2021-12-21) Mantilla Sanchez, Pedro; Najib, FayezThis paper verifies under realistic trading conditions the results in Moreira and Muir (2017) which shows that leveraging/deleveraging the index portfolio according to its past volatility with the use of index options brings extra risk-adjusted profits. We use as a proxy for the market portfolio the S&P 500 index in the period of 1996-2020 and use Chicago Board of Exchange (CBOE) traded options on this index. Leveraging/deleveraging with 30-day to maturity options yields negative extra profits irrespectively of trading at the bid/ask or at the quote midpoint. Our results imply that the improvement shown in Moreira and Muir (2017) was due to the combination of very frequent (daily) rebalancing in their portfolios and trading at the quote midpoint.