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Nisreen Hilal

DBA Graduate - 2018

Thesis title

Sovereign Wealth Funds Investments in US Listed Stocks

Supervisor(s)

Philippe Dupuy
This dissertation is a multidimensional research study of sovereign wealth fund investments in US public stocks. Using four different methodological approaches, applying regression, clinical, portfolio and case study analysis, I explore and document SWF investments in listed US stocks between 2005 and 2012. It has been proposed that the abnormal stock returns that accrue to target company shareholders could be due to the corporate governance, transparency and or celebrity status of the investing SWF. The findings in this study confirm the positive abnormal returns evidence suggested by previous research, but reveals no statistically significant relation with the SWF’s corporate governance, transparency, and or celebrity status. Then I engage into a clinical scrutiny of the sample that reveals that 73% of the 696 observations in the study period are actually the investments of one SWF, i.e., Korea Investment Corporation. The predominance of one Sovereign Wealth Fund in the US listed stocks market, is an interesting finding that we further explore in a detailed case study. We also expand the investigation by looking at these 696 events ranked according to their price performance in the 6 months prior to the event. Our portfolio analysis investigates the top 30 and bottom 30 investments based on their prior 6 months abnormal returns, and finds evidence of a statistically significant reversal in the post 180 days. In other words, past worst performers seem to have benefited more from these acquisitions than past best performers. Our case study of Korea Investment Corporation is warranted by the fact the KIC accounts for the vast majority of the observations in our sample, i.e., US public stock purchases by sovereign wealth funds between 2005 and 2012. Looking at KIC's investments and their post event returns, we find an almost 50-50 split in negative and positive post event abnormal returns. Furthermore, there is no evidence to suggest that transparency, corporate governance, and celebrity are the relevant explanatory variables. Korea Investment Corporation (KIC), is not a celebrity fund, based on Schimbor (2009) celebrity scores, it also has a corporate governance score of 60 and transparency score of 45 based on the Truman Index (Truman, 2007 and 2008). The predominance of KIC in the sample could be due to the fact that our study period coincides with the early creation years of KIC, 2005, and they were building their portfolio intensively during those early years.