NHH Brage (Norges Handelshøyskole)
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How has the Russia-Ukraine conflict “Pushed” or “Pulled” Renewable Energy Deployment in the EU? A qualitative study focusing on mapping the EUs renewable energy landscape in the light of the consequences from the Russia-Ukraine conflict.
Get PDFIn this thesis, we have conducted a qualitative study to investigate how consequences from - and the subsequent responses to - the Russia-Ukraine conflict have impacted key areas and factors that influence the renewable energy deployment in the EU. We have contextualized the situation by firstly, providing comprehensive historical records of the energy relations between the EU and Russia, whilst also analyzing the key developments in energy policy in the EU. Secondly, by an-alyzing previous literature that investigates how distinct factors are influencing RES, we have identified key areas and factors that serve as potential bottlenecks or accelerators in the context of renewable energy deployment in the EU. Followingly, we present both direct and indirect con-sequences from the Russian invasion to prepare the reader for the subsequent policy responses from the EU and implications of the consequences on key input factors in the renewable energy industry. Lastly, we present a discussion where we juxtapose our findings with the previous liter-ature to assess how the Russia-Ukraine conflict have “pushed” or “pulled” renewable energy de-ployment in the EU. The thesis demonstrates that the key developments in energy policy, through legal frameworks and energy strategies, in the pre-invasion decade, provided a necessary fundament for the EUs ability to swiftly implement changes, strategy, and funding. Whilst highlighting that the over-arching policy trend pre-invasion was addressing the sustainability dimension of the energy tri-lemma, the invasion moved the energy policy discussion towards ‘Energy security’. The key areas we identified as bottlenecks pre-invasion were, firstly, the permitting process for RES projects, spanning from 4,5 to 9 years for solar and wind respectively in the pre-invasion period. And, secondly, the need for several grid-enhancements to stabilize, transport and store energy from intermittent RES. The key areas for acceleration were improving energy security, strengthening supply chains, and promoting energy efficiency. All of these were addressed by various policy responses from the EU, with the ‘RePower EU’ plan as an overarching policy um-brella. We see clear tendencies to solar PV deployment to have been accelerated by the invasion, whilst the situation for wind is more nuanced. However, the indirect consequences from the invasion, manifesting itself in increased input fac-tor prices and interest rates, have complicated the outlook on renewable deployment by rendering certain large-scale RES projects currently unprofitable. Furthermore, the overdependence on cer-tain countries in the supply chain raises questions regarding energy security over the long-run in
a high-RES EU – for instance, moving from Russian fossil fuel dependence to Chinese mineral dependence.nhhma
Mind The Gap: Decomposing the Credit Spread Puzzle : An empirical analysis of credit risk pricing in the Norwegian Corporate Bond Market in the period 2014-2023
Get PDFThis thesis presents a comprehensive analysis of the credit spread puzzle in the Norwegian
corporate bond market, a topic that has been largely unexplored since 2015. Focusing
on the period from 2014 to 2023, we aim to quantify the extent of the puzzle, identify
additional risk premiums demanded by investors, and explore the factors driving these
premiums. Our analysis of 30,647 transactions reveals that the median proportion of
actual credit spreads explained by default models is 28 percent. We observe sector-specific
variations, with industrial, oil, and shipping sectors showing significant mispricing. Our
findings indicate that Norwegian investors seek additional compensation for sector-specific
risks, particularly in the volatile industrial, oil, and shipping sectors, and for bonds from
smaller issuers. A notable size premium is evident, especially in sectors susceptible to
economic downturns. The study also suggests a substantial liquidity premium, challenging
to quantify due to the market’s illiquid nature. The research contributes to understanding
the Norwegian corporate bond market’s complexities, highlighting the nuanced nature of
bond pricing beyond what standard models can explain.nhhma
Expanding Horizons in Norwegian High-Yield Bond Spread Estimation : A Comparative Analysis of Structural Bond Pricing Models in the Period 2015 to 2023
Get PDFInvestigating the complex dynamics of credit risk pricing in corporate bonds has been a significant area of interest in financial research for many years. This thesis examines the effectiveness of various structural bond pricing models in predicting credit risk premiums for Norwegian high-yield bonds from 2015 to 2023. Building on the approach by Eom et al. (2004), we compare the predictive accuracy of the extended Merton model with that of the Longstaff & Schwartz (1995) and Leland & Toft (1996) models. Our findings indicate that the extended Merton model tends to underpredict spreads, consistent with prior studies. Additionally, the Leland & Toft model and Longstaff & Schwartz model underpredict spreads, a deviation from existing research. Among these, the Longstaff & Schwartz model emerges as the most precise in predicting spreads for Norwegian high-yield bonds, suggesting the utility of diverse structural bond pricing models beyond the commonly used Merton model. This research, in line with prior empirical studies, highlights a substantial deviation of modeled spreads from actual observed credit spreads, known as the "credit spread puzzle." The thesis attempts to explain the key drivers of this puzzle within the extended Merton model by examining a range of explanatory variables that serve as proxies for liquidity premium and risk premium. Contrary to previous research, our results suggest that the extended Merton model may inherently incorporate a liquidity premium, leaving the credit spread puzzle exclusively to risk premiums. Moreover, we find that the stock price momentum premium is significant in determining credit spreads, whereas neither the market factor size nor the value factor is. We find that the momentum variable may incorporate the effects typically associated with size and that the effect of value is captured by the capital distribution factor. Alongside comparable research, we also discover that high-yield bond investors demand a risk premium for being invested in the sectors of Oil and Gas E&P, Oil and Gas Services, and Shipping. Through this research, it becomes evident that accurately pricing high-yield bonds is a complex endeavor. Particularly challenging is isolating the true essence of the credit spread puzzle, given the potential biases present in both the extended Merton model and the benchmark market spreads.nhhma
Flexible Production of Green Ammonia : An Optimisation Approach to Cost-Efficient and Adaptable Power to Ammonia Production in Denmark
Get PDFThe majority of global ammonia production relies on non-renewable energy, as green
ammonia is substantially more expensive. However, the energy landscape is changing,
and countries like Denmark are expanding their capacity in renewable energy. Given this
increase in renewable capacity, demand for ammonia, and net-zero solutions, it is essential
to reduce the total cost of ammonia and increase its competitiveness.
The primary objective of this thesis is to study the feasibility of decreasing the overall cost
of ammonia in the established renewable market of Denmark. The ammonia production
configuration considered in this thesis consists of alkaline water electrolysis and Haber-
Bosch synthesis. We employed a multi-period, mixed integer optimisation model over the
three coming decades and adjusted key elements to see their effect on cost. The ammonia
system considered is grid-connected to the west Denmark electricity grid DK1 and utilise
historical NordPool data from the same electricity grid for our optimization model.
The findings indicates that savings of up to 1,5 percent are possible for ammonia production,
when utilising excess production capacity and the capabilities are improved to satisfy
annual demand. The savings occur as a result of more production during advantageous
time periods. However, excessive production capacity increases costs as a result of the
systems capabilities. Furthermore, we find intermediate hydrogen storage to not be
beneficial, except for long-term periods of extreme electricity price volatility with no
excess production capacity. Additionally, the alkaline electrolysis should be minimized
in relations to the appropriate excess production capacity of the Haber-Bosch synthesis
given its high degradation.nhhma
Scale, Skill and Returns : An empirical study of returns to scale in the Nordic mutual fund industry
Get PDFThis study investigates how fund size and industry size affects the performance of Nordic
mutual funds. While the effects of scale in the mutual funds industry has been widely
studied in the US, literature specific to the Nordics is scant. Because of this we motivate
our hypotheses using existing literature from US markets and investigate this in the
Nordics. We begin by sampling 638 actively managed mutual funds that invest in the
Nordic mainlands from 2008-2022. After cleaning the data, we apply fund fixed effects
and a recursive demeaning procedure to eliminate the omitted variable bias and the finite
sample bias. Using this we can investigate the effects of scale and skill in a bias-free
setting using multivariate panel regressions.
We find empirical evidence of decreasing returns to scale at the industry level. As the
size of the mutual funds industry increases in relation to the market capitalization, the
ability of a single fund to outperform its designated benchmark decreases. Using the
enhanced recursive demeaning estimator from Zhu (2017), we also find empirical evidence
of decreasing returns to scale at the fund level. As the size of a single fund increases, its
ability to outperform its designated benchmark declines. We also investigate this for each
country separately. Every country apart from Denmark shows industry decreasing returns
to scale, while every country apart from Sweden shows decreasing returns to scale at the
fund level.
Next, we investigate the determinants for decreasing returns to scale. We find evidence
that funds with a higher turnover-ratio, small-cap trading funds and funds which take more
risk are more prone to decreasing returns to scale at the fund level. The evidence is in line
with the theory of liquidity constraints from Berk and Green (2004). We could however
not find any evidence of these determinants at the industry level. Finally, controlling for
the effects of scale we investigate skill in the Nordic mutual fund industry. Our study
shows that the Nordic mutual funds industry is skilled, and that skill increases over time.
However, because of an increasing industry size, and an increase in the average fund size
this has failed to translate into higher benchmark-adjusted returns.nhhma
Predicting Credit Spread Dynamics in the Norwegian Corporate Bond Market : An empirical analysis of High Yield and Investment Grade bonds in the Period 2014-2022
Get PDFThis thesis examines the credit spread dynamics between High Yield (HY) and Investment
Grade (IG) bonds in the Norwegian corporate bond market. The sample consists of
monthly pricing data for 37 distinct bonds spanning from 2014 to 2022.
We apply the extended Merton model (Eom et al., 2004) to calculate model credit spreads
further used in the analysis. The first part of the analysis is a regression analysis
comparing the mispricing between HY and IG bonds. Applying several non-defaultrelated
variables, we explore the differences in mispricing, both in terms of explanatory
power and their relative magnitude. The second part of the analysis is a regression
analysis aiming to predict credit spread differences between HY and IG.
We find that the model underpredicts credit spreads for HY but overpredicts credit
spreads for IG. Furthermore, modelled credit spreads explain 3.1% of the variance in
observed credit spreads for HY bonds and 1.9% for IG bonds. We identify that both
risk grades are broadly affected by the same variables but with different magnitudes.
HY appears to be more sensitive to industry dynamics and market risk compared to IG.
Lastly, leverage plays a pivotal role in explaining variance in credit spread differences,
having an explanatory power of 83.6%.nhhma
Why Did Norway Encounter Pronounced Levels of Inflation After the Pandemic? A Study of Inflation Dynamics
Get PDFThis master thesis conducts a comprehensive analysis of inflation dynamics, trying to gain a
better understanding of why inflation increased to such pronounced levels in the years after
the COVID-19 pandemic. The pandemic caused the world economy several serious problems,
with high inflation being the major problem in the aftermath of the pandemic. We analyzed
this problem by employing a time series analysis to identify and evaluate key determinants, as
well as a case study, comparing inflationary trends in Norway and Switzerland.
Through detrending CPI and nine different economic variables, we carried out a multiple
regression analysis to investigate whether the economic variables could explain the rise in
inflation. In our empirical investigation, we ascertain that money supply, credit volume, the
Harmonized Index of Consumer Prices (HICP), and unemployment emerge as the most
significant factors influencing inflation. Our findings support existing literature on inflationary
processes, which provides policymakers and economists with nuanced perspectives for
informed decision-making.
In addition to the time series analysis, a comparative case study between Norway and
Switzerland is undertaken to further assess how a country´s macroeconomic landscape
influences inflation. The study reveals a notable disparity in inflation rates, with Switzerland
exhibiting lower inflation levels attributed to the resilience of its currency. This underscores
the vital role of exchange rate dynamics in shaping inflation outcomes and advocates for a
holistic approach to economic policy formulation.
In conclusion, this master thesis contributes to the ongoing discussion on inflation, presenting
a nuanced analysis that deepens our comprehension of the multifaceted forces driving
inflationary trends. Through a combination of empirical evidence and case study insights, our
research strives to inform strategic policy decisions aimed at fostering economic stability and
resilience in an era of continual change.nhhma
Å bryte med glasstaket: Kan ikke, eller vil ikke? En kartlegging av hvordan revisorers ønske om å bli partner, kan påvirkes av kjønn, familiestruktur og selskapsstørrelse.
Get PDFIt is a well-known and global phenomenon that we often see a significant greater number of men than women who holds the top executive jobs. Whether it´s in the finance sector, among audit firms or in other sectors who have a history of male-dominance, it´s rarely a surprise that the majority of the top executives are men. Throughout history, there has been a lot of research on gender equality in the business industry, for instance how gender bias and stereotypes can explain the big gap between men and women at the higher levels. The term “the glass ceiling” is often used as a description of different barriers that women need to overcome in order to get to the top in corporations. Familial factors are also mentioned to describe why fewer women than men get the top executive jobs. Something less studied, are the different factors behind women’s desire to someday become an audit partner. This master thesis seeks, based on a similar study from New Zealand (Whiting & Van Vugt, 2006), to lighten whether there are any differences between gender, family structure and firm size, regarding auditors’ career ambitions. Today, many of the big audit firms have active measures to try to increase the number of women at the higher positions. Therefore it´s useful to understand the factors behind auditors’ desire, for the firms to adjust their measures and increase the number of women.
Our study finds that women auditors in relationships with a partner who wants to pursue a career, have a higher desire to make partner in an audit firm, than equal men. Furthermore, we found that the desire to make partner is higher for auditors with children. Based on our study, we can conclude that there exist aspects within family structure that have an effect on auditors’ desire to make partner. By controlling for age, we find that the desire to make partner declines with an increasing age. Nevertheless, our study did not make any further significant findings, but we can observe small trends showing that the desire to make partner is lower for married auditors. In addition, we can observe that the audit students have the highest desire to make partner. Gender alone does not seem to contribute to auditors’ desire to make partner, but there might exist gender differences between auditors in relationships. Firm size does not seem to have an effect on the desire to make partner. However, our findings indicate that women affiliated with other than the Big Five-firms, may have a higher desire to make partner.
The findings of this study are relevant to audit firms, and the industry in general, who seeks to get a deeper knowledge of which factors that determine auditors’ desire to make partner. This master thesis is also relevant to those who wants to continue the research on auditors’ career path.nhhma
Fear and Forecasting in Scandinavia : Implied Volatility Indices for the Scandinavian Equity Markets
Get PDFThis thesis investigates the use of the model-based and model-free implied volatility index
methodologies in Scandinavia from 2018 to 2023, leading to the creation of a composite
index for the region: SCANDI-VIX. It confirms a significant negative contemporaneouss
relationship between the Scandinavian implied volatility indices (NORVIX, DANVIX,
SWEVIX, SCANDI-VIX) and their underlying index returns, validating their role as
a "fear gauge." The study reveals an asymmetric response of these implied volatility
indices to market returns, aligning with the leverage effect theory. We investigate the
structural changes in the underlying market time-series as a consequence of the COVID-19
pandemic, and it’s implications for EGARCH forecasting. With a final key finding being
the increased forecasting quality observed when utilising implied volatility as an input
feature in the Extreme Gradient Boosting (XGBoost) machine learning model.nhhma
Wise use of renewable energy in transport
Get PDFThe transport sector accounts for around 25 % of global energy use, considering both fuel production and consumption. To mitigate climate change, a fast decarbonization of transport is therefore often seen as a necessity, as advocated by the International Energy Agency in its Net Zero by 2050 scenario. In contrast, Shell's Sky scenario envisages Net Zero by 2070 by first picking the lowest hanging fruits within all sectors, and hence a much slower de-carbonization of the transport sector. We investigate how renewables, a scarce resource over the next decades, could be used most wisely within the transport sector or alternatively within the energy sector. Our results stress that priority up to 2050 should be: First, to use new renewable energy to replace coal fired electricity production to nearly decarbonize the electricity grid; Second, to gradually electrify road transport; Third, continued use of fossil fuel in shipping and aviation.Wise use of renewable energy in transportpublishedVersionpublishedVersio