Economics - Doctoral Theses

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    Mutual fund performance: timing and persistence
    (University College Cork, 2023-04-24) Yin, Zhengnan; O'Sullivan, Niall; Sherman, Meadhbh; University College Cork; China Scholarship Council
    We apply the nonparametric methodology of Jiang (2003) to examine whether bond mutual funds can time the bond market by adjusting their portfolios' market exposure based on anticipated market movement. This approach has several advantages over the widely used regression-based tests such as Treynor-Mazuy(1966) and Henrikkson and Merton (1981). Using a large sample free of survivorship bias from the US, UK, and China, we find some evidence of positive market timing of bond funds at the individual fund level. On average, bond funds show neutral to slightly negative market timing ability. After controlling for public information, we find that a number of bond funds successfully time the market based on private timing signals. In terms of categories, we find strong evidence of positive market timing for Government bond funds as a group, consistent with the findings of Huang and Wang(2014). We apply a nonparametric methodology to test the liquidity timing skills across individual equity mutual funds in three countries(the US, UK, and China). We calculate the monthly stock market liquidity using simple averages and the asymptotic principle analysis(APCA) method based on six stock liquidity measures. Using an across-measure of market liquidity from APCA, we find a relatively small number of funds demonstrate statistically positive liquidity timing skills at a 5% significance level for the period of 2000-2021. After controlling the lagged market liquidity information, we still find a small number of mutual funds that have conditional liquidity timing ability using the nonparametric method. We analyze the performance of asset allocation funds based on the best-fit multifactor model, including both stock and bond market factors. Using US and UK data, we find asset allocation funds do not outperform their benchmarks on average. We use both Treynor and Mazuy(1966) and Henrikkson and Merton (1981) methods to test the stock and bond market timing ability of allocation funds. As groups, US and UK asset allocation funds have neutral to perverse stock market timing ability. However, UK allocation funds have positive bond market timing ability. At the individual fund level, there is a range of funds that demonstrate positive stock market timing as well as bond market timing ability for both markets. We then test the performance persistence of these funds using an innovative bootstrap method to control for the non-normality issue in fund returns. We find little evidence of performance persistence for US funds for both decile portfolios and small-size portfolios. There is some evidence of performance persistence for UK funds using decile and small-size portfolios.
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    An assessment of the impact of land structure on the economic performance of dairy farming in Ireland
    (University College Cork, 2021-11-11) Bradfield, Tracy; Hennessy, Thia; Butler, Robert; Dillon, Emma; Teagasc
    The European Union (EU) milk quota was abolished in 2015 leading to an increased demand for land for dairy farming in Ireland. Between 2014 and 2019, raw milk production increased by 42 percent in Ireland (Bradfield et al., 2021a). However, the land market in the Republic of Ireland is restricted by low mobility. The Republic of Ireland’s agricultural land market experiences very low levels of sales with less than 1 percent of agricultural land sold each year (CSO, 2020a). This is attributed to a strong desire of people in Ireland to keep land in the family name. Ireland also has a low level of land rental. To increase land rental on secure leases, the Irish government increased incentives in 2015 for landowners to rent out their land on long term leases. Using econometric techniques applied to farm-level Teagasc National Farm Survey data, which is part of the Farm Accountancy Data Network, this research provides contributions to the study of agricultural land markets that focus on three main research questions. These include an assessment of the factors that influence the decision to rent in agricultural land and the determinants of profit among renting dairy farms in Ireland, the effect of land fragmentation on dairy farm technical inefficiency, and the impact of land lease duration on dairy farm investment. Research findings show that dairy farms are using the rental market to improve profitability. Farm characteristics such as a small size, a high stocking rate, the presence of a successor and high levels of hired labour increase the likelihood of entering a rental agreement. Renting in land and a less fragmented farm structure reduce dairy farm technical inefficiency. Dairy farms can reduce their technical inefficiency by either renting or purchasing land parcels that are adjoining their current land resources. The results also indicate that farms with a high portion of rented land, which is rented on long-term leases, invest more in their herd and capital. This suggests that long-term land rental is a feasible means to create certainty over investments when land purchases are not possible. In conclusion, these findings highlight the benefits of an active land market to individual farmers and the overall dairy sector, which lends support to policy measures to improve the rental market and thus land mobility. Although the number of agricultural land rental agreements has risen since the removal of the EU milk quota and the increase in tax incentives for long-term land leases, Ireland continues to have the lowest level of land rental in the EU, at 19 percent, compared to an average of 54 percent (European Commission, 2018). This research recommends a review of the structure of current tax incentives for long-term leases because the existing thresholds do not maximise incentives for farmers to rent out their land. Other contributions of this research include a greater understanding of markets with an inelastic supply curve, the role long-term leases can play in improving tenure security, the importance of an extensive use of land fragmentation indicators when studying farms’ structures, and the requirement for market intervention to improve land mobility. Topics for further research are also outlined.
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    Macroeconomic and financial leading indicators of economic activity and sovereign bond yields: a practitioners' perspective
    (University College Cork, 2021-09-01) Brady, Austin T.; Ryan, Geraldine; Kavanagh, Ella
    This thesis examines how effective practitioners are at selecting leading indicators of economic activity and sovereign bond yields. The research is conducted prior to and in the aftermath of the Global Financial Crisis (GFC) in three countries: Germany, the United Kingdom (UK) and the United States (US). Empirical research such as Stock and Watson (1989, 2002a, 2002b, 2004, 2007), Artis et al (2005), Schumacher (2007), Ludvigson and Ng (2007, 2009) forecast economic activity and sovereign bond yields in the three countries. The aforementioned research has the following features: (i) use large datasets; (ii) use similar indicators across countries and time periods; (iii) have datasets that cover periods prior to the GFC and (iv) datasets that are not pre-screened for leading properties. This thesis focuses on more refined datasets, selected by two sets of practitioners: economist practitioners and fixed income practitioners. We address any potential changes impacting economic activity and sovereign bond yields by creating datasets for the period in the aftermath of the GFC. In addition, the datasets selected by economist and fixed income practitioners are pre-screened for leading properties, with only leading indicators used in the analysis. To examine the effectiveness of practitioners, this thesis develops a unique primary dataset for the three countries, based on the input of financial market practitioners, employed professionally by financial institutions. Face-to-face structured interviews with a total of 35 practitioners working in the International Financial Services Centre (IFSC) located in Dublin, Ireland, shows that whilst both sets of practitioners have access to large databases, they use smaller refined datasets when forecasting, compared to those previously examined in the literature. Practitioners operate within high-paced environments where fast decision making is key. Two types of practitioners are identified to create two distinct datasets for economic activity and sovereign bond yields: economist practitioners and fixed income practitioners. Economist practitioners use a variety of information to make forecasts of economic activity and fixed income practitioners use the latter and market-specific information to forecast sovereign bond yields. Both types of practitioners operate in real time, high-paced environments, often on behalf of clients. Economist practitioner and fixed income practitioner datasets are examined for leading properties in three time periods: the period prior to the GFC, the period during the GFC and the aftermath of the GFC. The objective is to determine whether both sets of practitioners are successful at selecting leading indicators; whether practitioners react to changes in the business cycle when selecting additional leading indicators; whether specific indicators lead for certain periods and whether commonalities exist among leading properties selected in the three countries under examination. Our findings find evidence of the following: economist and fixed income practitioners are better at selecting leading indicators in periods of more certainty; both sets of practitioners react to changes in the business cycle when selecting leading indicators; indicators lead for specific periods; there is a small amount of indicators that do not lead economic activity and sovereign bond yields and there is no common set of indicators that lead either economic activity or sovereign bond yields across the three countries. Given that we know economist and fixed income practitioners select leading indicators, we need to determine how accurate they are when forecasting economic activity and sovereign bond yields. In order to determine this, we must create leading composite indices for each period. We create a composite index based on the leading indicators selected by both economist practitioners and fixed income practitioners, and we test the out-of-sample forecasting capacity of this index. For each country, a total of two composites are created for the 2005-2008 period, two (one composite is created for the fixed income practitioner dataset) for the 2008-2013 and one composite for the 2013-2018 period. Our results are compared to a series of benchmarks. The benchmarks used are the Autoregressive (AR) and Random Walk (RW) models. However, we include two additional composites for economic activity (the OECD and the Conference Board (CB)) and one additional index for sovereign bond yields (the Barclays bond index). The results show that the economist and fixed income practitioner composites, for Germany and the UK in particular, have equal predictive ability relative to the Barclays benchmarks in the pre-Lehman and recovery periods. The results from this thesis show that practitioners add considerable value in their indicator selection. The results from this thesis have a number of important implications going forward for practitioners. The first is that the datasets selected by both economist and fixed income practitioners should statistically examine the leading properties of their datasets, prior to forecasting economic activity and sovereign bond yields. The results show that practitioners should periodically evaluate whether the indicators practitioners use are leading instead of making the assumption that they lead. Secondly, given the robustness of the static composites constructed using PCA, practitioners should use the steps outlined by the OECD (2008) to construct leading indicator composites. Thirdly, practitioners may improve economic activity and sovereign bond yield forecasts by using the static PCA approach to construct composites.
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    The constructive developmental impact of effectuation on practice
    (University College Cork, 2020-06) Lyons Coakley, Maria; Doyle, Eleanor
    Effectuation is a non-predictive decision-making logic of control in uncertain situations, that begins with given means and is a set of techniques, principles and criteria to generate and select between possible outcomes that can be created with the means (Sarasvathy 2001, 2008). This Portfolio focuses on the constructive developmental impact of effectuation on practice, where constructive development was utilised as an apparatus of thought. Research was conducted through first-person action research to address the research question, which focused on the growth in complexity of meaning-making and impact on lived experience through effectuation. Merging the concepts of effectuation and constructive development is novel. The combination represents a contribution linking personal and professional development to action and practice. Through understanding the adaptive challenges of transitioning to effectuation, insight is generated on how the transition was made and its impact on practice. Impact is identified by analysing changes across four domains i.e. cognitive, inter-personal, affective and intra-personal (psychological quadrants). The Portfolio is organised into three essays, reflecting phases in the action research cycles and professional development journey. Essay One is a professional development review and is the pre-step and construction phase of the action research, which defines the research question and reveals the developmental focus. This essay demonstrates the forming and dominance of a causal and reductionist way of knowing. A developmental agenda of challenging and expanding meaning-making through exploring the perspectives of effectuation and systems-thinking is identified. Essay Two reports on the planning and observation phase of the action-research. It demonstrates how actively engaging with complexity, uncertainty theories and effectuation through the lens of systems-thinking challenged meaning-making. Engaging with these perspectives recognises the limitations of causal logic, particularly in a VUCA world. It identifies the strength of the practitioner attachment to goal-orientation such that practicing effectuation was a developmental challenge. Essay Three reports on the transforming practice phase of the action-research inquiry, which involved challenging assumptions, goal-orientation and domination of internal and external authorities. Through practicing effectuation, Essay Three demonstrates constructive-developmental and phenomenological differences between operating and being effectual. The Portfolio concludes with key findings for practitioners, including how being effectual supports development of mental complexity in modern and post-modern VUCA environments. It reports on how practitioners may underestimate how self-created constructs, external influences and the intra-personal quadrant are lenses impacting on their view of the world. Those interested in professional development may think that the external authority is the one to focus on, to develop an independent way-of-knowing, however this research found the subjective internal authority was also restrictive. The research has implications for organisations, such that liberating leaders and teams to be effectual could have an impact on developing a culture of innovation, adaptability, exploration and creativity.
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    A values based creative learning centred accounting pedagogy
    (University College Cork, 2020-06) Murphy, Nora; Doyle, Eleanor; Cork Institute of Technology
    This Portfolio of Exploration provides a narrative account of self-study action research – of the practice of lecturing Accounting. The Action Research focused on aligning educational values of dialogue, openness and inclusion to practice, through developing and introducing a creative learning centred accounting pedagogy. The motivations in the research stemmed from a dissonance between identified espoused educational values and those evident from educational practice. In the literature on the lecturing of Accounting, a gap is identified. While much research offers novel techniques for application in the technique of accounting education, transformational change of the lecturer is generally absent. To address this gap, this research reports on transformation, which occurred first in me, the lecturer, as I internalised and engaged with a creative way of being. A creative way of being is identified as the means to ‘bridge the gap’ between theory and practice by challenging previous assumptions underlying a text book-led approach which, heretofore, focused on measurable outcomes. The action research approach is complemented with Kegan’s (1982, 1994) theory of Adult Mental Development to deliver on the research goals, reported over three essays. Essay One ‘Reflection’ provides a Professional Development Review to track the development of my meaning making and to unearth the assumptions underlying my accounting lecturing practice. This reflective phase of the research formed the basis for identification of a set of developmental principles to explore in the next phase of the action research. Essay Two ‘Transition’ engages in planning for action by researching themes of creative dialogue, critical dialogue and andragogy/pedagogy as the selected mechanisms for the expression of educational values in practice. In this phase of the action research I engaged with a range of source thinkers on Higher Education to clarify and challenge assumptions underlying my developmental goals. Essay Three ‘Observation and Reflection’ analyses the action of implementing a creative way of being through a series of research cycles, which examined a new pedagogy of learning-centred accounting practices. Each action research cycle was evaluated through criteria derived from the four quadrants of psychological self (interpersonal, cognitive, intrapersonal and affective as applied in Kegan, 1999 and outlined in Drago-Severson, 2011; 2016). Collectively the analysis reveals developmental change over four action research cycles. The Portfolio Conclusion reports on an internal creative change in the lecturer related to thinking (intrapersonal self) and feeling (affective self) about practice. The change required pushing standardised accounting lecturing techniques outside of the realm of the technical range to adaptive transformational changes. It is found that a values-based first-person action research approach has the capacity to entice a wider community of action researchers to engage in reflective questioning resulting in accounting educational reform.