Essays on financial technologies

Karkkainen, Tatja (2021) Essays on financial technologies. PhD thesis, University of Glasgow.

Abstract

The four essays contained herein this study focus on recently emerged questions in the field of Financial Technology (FinTech). This new finance domain has a growing importance in the finance discipline, policy, and practice. The FinTech is the common theme, while the thesis is organised to investigate the open questions separately in the essays.

The first essay assesses the required human capital in FinTech. Recent technological developments have enabled a wide array of new applications in financial markets, e.g. big data, cloud computing, artificial intelligence, blockchain, cryptocurrencies, peer-to-peer lending, crowdfunding, and robo-advising, inter alia. While traditionally comprising of computer programs and other technology used to support or enable banking and financial services, the new FinTech is often seen as enabling transformation of the financial industry. A more moderate and critical view suggests that for the full transformative potential of FinTech to be enabled, there is a need for an updated educational curriculum that balances knowledge and understanding of finance and technology. A curriculum that provides a skill portfolio in these two core components and complements them with applied knowledge. This essay also makes an inquiry into the educational curriculum in finance and technology, aiming to inform this modern educational agenda, and into the skills shortages, as identified by firms and experts with examining some of the first educational programmes in FinTech.

The second essay investigates the relationship between financial literacy and attitudes to cryptocurrencies, using microdata from 15 countries. The financial literacy proxy exerts a large negative effect on the probability of currently owning cryptocurrencies. The financially literate are also more likely to be aware of cryptocurrencies, and less to own them due to their price volatility. In addition, data from a second survey of retail investors in three Asian countries is used to externally validify the financial literacy proxy and findings. I show that the relationship between financial literacy and attitudes to cryptocurrencies is moderated by a different perception of the financial risk involved in cryptocurrencies versus traditional investments by the more financially literate. The findings shed light on the demand for cryptocurrencies among the general population and suggest has been largely driven by unsophisticated investors.

The third and fourth essays are closer in their empirical investigation of asset price timeseries data. In the third essay, I assess the bitcoin futures introduction into the retail investor driven marketplace. Bitcoin futures were introduced in December 2017 as an effort to provide institutional and retail investors with additional trading tools for bitcoin. This study analyses the bitcoin Futures mid-quote data from CBOE, and Bitcoin market index applying VAR and VECM process methodologies, Hasbrouck’s information share and the Gonzalo-Granger component share measurement to examine price discovery in bitcoin markets. The results drawn on the intra-day prices show that the futures are leading the price discovery at different frequencies even with comparably low futures trading volumes. The empirical results support the extant literature of futures-spot market price discovery and the role of informed traders in the futures market.

Finally, the fourth essay attempts to evidence the network externalities on digital assets using exchange-listed Initial Coin Offerings (ICOs) data. Utilising an online database comprising of self-reported ICO characteristics, measures of post-ICO performance, along with information on business social networks, higher fundraising figures are found to contribute positively to the ICO long-term success. This positive impact is multiplied by six times when fundraising is conducted to an existing, proprietary blockchain. This large impact is explained by the network effect. The modified information ratio measure is introduced to approximate the comparative quality signalling of ICO organisations using price timeseries and benchmarking these to already functioning blockchain technology, e.g. ethereum in the long-term. The ICO sample’s mean trading period on an exchange is 1.5 years and is used for long-period asset analysis. Additionally, the cointegration to the market technology benchmark is found to have a large, significant negative effect on long-term ICO organisational success as this indicates lower ICO intrinsic value.

The final concluding chapter summarises the thesis contribution, implications and a selection of future research avenues relating to FinTech research sub-field.

• Item Type: Thesis (PhD)
• Qualification Level: Doctoral
• Subjects: H Social Sciences > HG Finance
• Colleges/Schools: College of Social Sciences > Adam Smith Business School > Accounting and Finance
• Supervisor's Name: Panos, Professor Georgios
• Date of Award: 2021
• Depositing User: Theses Team
• Unique ID: glathesis:2021-82375
• Copyright: Copyright of this thesis is held by the author.
• Date Deposited: 12 Aug 2021 11:09
• Last Modified: 01 Dec 2022 11:29
• Thesis DOI: 10.5525/gla.thesis.82375
• URI: https://theses.gla.ac.uk/id/eprint/82375