The effect of government expenditure on economic growth: The case of Tanzania using VECM approach

The purpose of this paper is to observe empirically the effect of the government spending annex economic growth in Tanzania for the period covered 1990 to 2015 using VECM approach. The results revealed the existence of long-run cointegration among all our variables. Also, the results showed that government expenditure, foreign direct investment inflows, gross capital formation and inflation have positive and significant associations with Tanzania economic growth in the long-run and short-run as well. However, the government and policy-makers must become stable the variation of the inflation rate of commodities to persuade economic growth of Tanzania. Finally, the study suggests that government expenditure promotes economic growth in Tanzania and the paper recommends that more of government's resources should highly allocate to capital expenditure. Keywords: Government Expenditure, Economic Growth, VECM, and Tanzania

Stock Market Volatility, Speculative Short Sellers and Weekend Effect: International Evidence

We test the Chen and Singal (2003) hypothesis that speculative short sellers add to the selling pressure on Mondays, and hence add to the weekend effect, by examining evidence from 60 market indices. We find strong evidence that, until about a decade ago, the actions of short sellers could explain the weekend ef- fect. Recently, however, the relationship between short sales and the weekend effect is gradually dissi- pating in developed markets, probably due to the cross-market hedges of short sellers. These findings strongly support, rather than weaken, the Chen and Singal hypothesis

Stock Market Volatility, Speculative Short Sellers and Weekend Effect: International Evidence

We test the Chen and Singal (2003) hypothesis that speculative short sellers add to the selling pressure on Mondays, and hence add to the weekend effect, by examining evidence from 60 market indices. We find strong evidence that, until about a decade ago, the actions of short sellers could explain the weekend ef- fect. Recently, however, the relationship between short sales and the weekend effect is gradually dissi- pating in developed markets, probably due to the cross-market hedges of short sellers. These findings strongly support, rather than weaken, the Chen and Singal hypothesis

Essays in financial economics

Thesis advisor: Zhijie XiaoThis dissertation covers three essays in the realm of investor heterogeneity. Traditional financial economics theories assume that agents are identical. However, daily practice of finance exhibits phenomena that cannot be explained in the context of homogeneous agents. Thus behavioral economists relax the agent homogeneity assumption and allow different types of agents to interplay, which can explain a series of phenomena, including bubbles (Scheinkman and Xiong, 2003,etc), among others. The first chapter of this dissertation answers the question: what kind of investors flock to an IPO--mostly sophisticated or mostly naive? The answer to this question points to explaining the puzzlingly extreme trading volume on the first day after an IPO. Existing explanations rely on institutions such as day trading, short selling and inter-dealer trades, yet IPO frenzies are common even when these are entirely absent. Recent evidence points to the possible importance of sentiment from retail investors, but it is not yet clear what kind of retail investors might be harboring these emotions. I access a unique data set for Chinese IPOs that measures investor experience and trading records. I find that inexperienced investors are initially drawn to the IPO while established investors remain on the sidelines. Over time, investor composition shifts in favor of experienced investors. More importantly, I identify market timing of purchase (together with the timing of selling, the purchase price, etc, which I define as the decision bundle) as the predominant channel for determining heterogeneity in returns for experienced versus for inexperienced investors. Furthermore, I find that investors do learn to be more patient and get better investment performance thereof. Also, I am able to depict the learning curve by documenting that the marginal effect of learning varies across the level of stock of experience, and across heterogeneous investor type. The second chapter examines the effect of short selling via the unique setting in the Hong Kong stock market and find that, when a stock becomes shortable, its trading activities decrease, liquidities worsen, and information asymmetries increase. This finding contradicts both the existing theoretical models, and recent empirical studies using global financial crisis data. We extend the sequential trading model with short-sales constraints of one asset by Diamond and Verrecchia (1987) to the case of multiple assets. The model predicts that our empirical results are due to uninformed traders switching their tradings to non-shortable securities. Chapter 3 uses a unique short selling setting in Hong Kong stock market, and tests the Chen and Singal (2003) hypothesis that speculative short sellers add to the selling pressure on Mondays and hence add to the weekend effect. We document that, first, the weekend effect exists in Hong Kong stock market, regardless of the existence of short sale constraints; second, after introducing short selling, the individual stocks face more significant weekend effect. The reported result is robust over different estimation models, and over different choices of control groups. Our findings strongly support the Chen and Singal (2003) hypothesis.Thesis (PhD) — Boston College, 2014.Submitted to: Boston College. Graduate School of Arts and Sciences.Discipline: Economics

Effect of External Borrowing and Foreign Aid on Economic Growth: The Case of Tanzania Using ECM Approach

The aim of this paper is to examine the effect of the external borrowing and foreign aid on economic growth in Tanzania over the period of 1992 to 2014 using ECM approach. The results reveal the presence of long-run co-integration among variables. The results shows that the foreign reserves, exchange rate and external borrowing have positive relationship and significant with economic growth while foreign aid has a negative and insignificant relationship with economic growth. The result also shows that the Foreign reserves, external borrowing, and exchange rate have a positive relationship and significant with economic growth while Foreign aid has negative relationship but insignificant with economic growth in the short-run.  The Tanzania government should look for another modality of foreign aid which can be more productivity to the economic development as well as to mobilize more domestic savings and revenue to reduce much dependence on foreign aid. Keywords: External Borrowing, ECM, Foreign Aid, Economic Growth, Exchange rate, Tanzani

The Day-of-the-Week Effect: New Evidence from the Chinese Stock Market

We study the day-of-the-week effect for A shares and B shares traded on the Shanghai and Shenzhen stock exchanges in China. We find that average Monday returns from A-share indexes are significantly negative during the third and fourth weeks, as in the U.S. market. However, average Tuesday returns on most of the A-share and B-share indexes are negative during the second week of the month. Even after controlling for autocorrelation and the spillover impact from regional and international markets, the day-of-the-week effect in the Chinese market remains significant.