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Cover photo: Reflexion-Das Photoatelier, Jens Werner, Rodgau
Table of Contents
Welcome to Trier 3
General Information 4
Directions 5
Conference Locations 6
Sightseeing in Trier 8
Academic Sessions (with Abstracts) 9
DGF 2018 Reviewers 64
Calls for Papers 66
Comments 68
Dear friends and members of the DGF,
On behalf of Trier University and the German Finance Association, I am de-
lighted to welcome you to the 25th Annual Meeting of the German Finance
Association (DGF) in Trier.
The conference aims at bringing together researchers and practitioners alike
to discuss the most recent research from all areas of finance, banking and
insurance. We have received 222 submissions from more than 20 countries.
In a double blind review process, all submissions were reviewed by at least
two reviewers. We are extremely grateful to all 134 reviewers for their
important contribution to the conference. The conference program com-
prises 30 sessions and a poster session. Professor Alexander Ljungqvist,
Stockholm School of Economics and New York University (Stern School of
Business), has kindly agreed to deliver the keynote speech.
This meeting would not be possible without the support from various in-
dividuals and institutions. In particular, we thank Deutsche Gesellschaft für
Finanzwirtschaft (DGF), KMPG Luxembourg, Wissenschaftsförderung der
Sparkassen-Finanzgruppe and Wirtschaftswissenschaftlicher Förderverein
Trier for their generous support.
I hope you will enjoy the conference and have a pleasant stay in Trier!
Sincerely,
Axel Adam-Müller
Professor of Finance
Trier University
4
General Information
Conference Venue* Universität Trier, Campus II (Behringstraße 21, Trier)
Reception* Thursday, from 07:00pm to 10:00pm at Stadtmuseum Simeonstift Trier (Simeonstraße 60, Trier)
Museum Visit* Friday, from 06:30pm to 08:00pm at Rheinisches
Landesmuseum Trier (Weimarer Allee 1, Trier)
Conference Dinner* Friday, from 08:00pm to 11:00pm at Kurfürstliches Palais, Rokokosaal (Willy-Brandt-Platz 3, Trier)
Wi-Fi Access Please use the eduroam network.
Contact Universität Trier
Universitätsring 15 54296 Trier Fon: +49 - (0)651 - 201 - 2722 Email: dgf2018@uni-trier.de
Taxi Phone Number Taxi-Zentrale Trier
Fon: +49 - (0)651 - 12012
Coffee Breaks Drinks and snacks will be provided in the foyer. On Friday, we offer lunch at Mensa Petrisberg. On
Saturday, lunch will be offered in the foyer.
Parking* Free parking directly in front of the conference venue.
*See enclosed maps for locations.
5
Directions
Conference Venue Public Transport (from Trier main station): Route 3: weekdays every ten minutes, exit at bus stop Bonifatiusstraße, journey time from town centre about ten minutes, followed by a ten minute walk Route 4: weekdays every half hour, exit at bus stop Universität Campus 2, journey takes about 15 minutes from town centre Route 83: on weekends, early mornings and evenings every half hour, exit at bus stop Bonifatiusstraße, travel time from town centre about ten minutes, followed by a ten minute walk Route 85: on weekends, early mornings and evenings, every half hour, bus stop Universität Campus 2, travel time 15 minutes from town centre For further information on public transport, please visit www.vrt-info.de/fahrplanauskunft/
Museum Visit and
Conference Dinner Bus shuttle service (from bus stop Universität Campus 2): On Friday, there will be a shuttle service to the Rheinisches Landesmuseum Trier (three minute walk from the conference dinner location and city centre).
The shuttle busses leave at 5:15pm, 6:00pm and 6:45pm in front of the conference location.
6
Conference Locations
1. Bus stop (Universität Campus 2) for public transport and shuttle bus
2. Mensa Petrisberg (Friday lunch)
3. Free parking
Source: OpenStreetMap.de
1.
2.
3.
3.
Conference
Venue
7
4. Trier main station (Hauptbahnhof)
5. Reception: Stadtmuseum Simeonstift Trier (Simeonstraße 60, Trier)
6. Museum Visit: Rheinisches Landesmuseum Trier (Weimarer Allee 1, Trier)
7. Conference Dinner: Kurfürstliches Palais, Rokokosaal (Willy-Brandt-Platz 3,
Trier)
4.
5.
6.
7.
8
Sightseeing in Trier
There are no less than nine UNESCO World Heritage sites in Trier:
1. Porta Nigra (adjacent to the location of the reception)
2. Roman Imperial Throne Room (Konstantin-Basilika,
adjacent to the location of the conference dinner)
3. Imperial Baths (Kaiserthermen)
4. Amphitheatre (Amphitheater)
5. Cathedral (Dom)
6. Church of Our Lady (Liebfrauenkirche)
7. Roman Bridge (Römerbrücke)
8. Barbara Baths (Barbarathermen)
9. Igel Column (Igeler Säule)
Sites 1., 2., 5. and 6. are all located within the town centre.
In addition, you might want to visit a UNESCO Memory of the World: The Codex
Egberti is on display in the Treasury of the Trier City Research Library (Schatz-
kammer der Stadtbibliothek Trier), alongside a Gutenberg Bible and other very rare
early prints.
9
Session A1: Empirical Asset Pricing I
Location: HS11, Time: Friday, 09:00 Chair: Rottke, Simon (Westfälische Wilhelms-Universität Münster)
Dissecting Commodity Comovements
Authors: Prokopczuk, Marcel1,2; Wese Simen, Chardin1; Wichmann, Robert1
Institution: 1: University of Reading; 2: Leibniz Universität Hannover
We study comovements in commodity futures markets. We show that a simple 3-factor model with tradable risk factors is able to explain most of the realized comovements in returns. We dissect the comovements and analyse whether they are induced by variations in the factor sensitivities or instead by fluctuations in the factor variances. Our analysis reveals that most of the comovements in returns arise from the variations in the factor variances and not from the factor sensitivities, casting doubts on claims of increased integration in commodity futures returns due to "financialization". We obtain similar results when analysing the commonalities between equity and commodity returns.
Discussant: Reinke, Martin (Ludwig-Maximilians-Universität München)
Empirical Analysis and Forecasting of Multiple Yield Curves
Authors: Gerhart, Christoph; Lütkebohmert, Eva
Institution: Albert-Ludwigs-Universität Freiburg
In this paper we suggest a consistent and stable approach for bootstrapping of yield curves in the post-crisis multiple curve environment. We apply our method to market data over the time period 2005–2017 and we provide an in-depth empirical analysis of the resulting daily tenor-dependent term structures of interest rates. Finally, we develop tractable dynamic factor models to forecast multiple yield curves. Our methodology takes into account cross-tenor dependencies and generates extremely precise predictions for the discount and for the risky yield curves for various forecasting horizons. In particular, it outperforms the standard benchmark approach of random walk predictions.
Discussant: Wichmann, Robert (University of Reading)
10
Curve Momentum
Authors: Paschke, Raphael1; Prokopczuk, Marcel1; Wese Simen, Chardin2
Institution: 1: Leibniz Universität Hannover; 2: University of Reading
We propose a momentum strategy that operates within commodity futures curves. The diversied curve momentum strategy generates a signicantly positive average return and a (annualized) Sharpe ratio of 1.28. The protability of the strategy has increased markedly in the more recent years. These returns are dicult to reconcile with risk based explanations, as evidenced by the signicantly positive alpha after controlling for exposure to several well-known risk factors. The average return on the diversied curve momentum strategy remains signicantly positive even after accounting for transaction costs.
Discussant: Rottke, Simon (Westfälische Wilhelms-Universität Münster)
Session A2: Bond Markets
Location: HS12, Time: Friday, 09:00 Chair: Schuster, Philipp (Karlsruhe Institute of Technology)
Lighting up the dark: Liquidity in the German corporate bond market
Authors: Gündüz, Yalin1; Ottonello, Giorgio2; Pelizzon, Loriana3,6; Schneider, Michael1,4; Subrahmanyam, Marti G.5
Institution: 1: Deutsche Bundesbank; 2: Vienna Graduate School of Finance; 3: Goethe-Universität Frankfurt; 4: Scuola Normale Superiore Pisa; 5: NYU Stern School of Business; 6: Ca' Foscari University of Venice
We study the impact of transparency on liquidity in OTC markets by providing an analysis of liquidity in a corporate bond market without trade transparency (Germany), and comparing our findings to one with full disclosure (the U.S.). We employ a unique regulatory dataset of transactions of German financial institutions from 2008 until 2014 to find that: First, overall trading activity is much lower in the German market than in the U.S. Second, similar to the U.S., the determinants of German corporate bond liquidity are in line with search theories of OTC markets. Third, frequently traded German bonds have transaction costs that are 37-67 bp lower than a matched sample of bonds in the U.S. While market liquidity is generally
11
higher in transparent markets, a subset of bonds could be more liquid in more opaque markets because of investors "crowding" their demand into a small number of more actively traded securities.
Discussant: Reynolds, Julia Elizabeth (Università della Svizzera Italiana)
Underpricing in the Eurozone Corporate Bond Market
Authors: Rischen, Tobias; Theissen, Erik
Institution: Universität Mannheim
We conduct the most extensive study of underpricing in the Eurozone bond market so far and find strong evidence of underpricing. In cross-sectional regressions we find patterns that are consistent with bookbuilding-based theories of underpricing and inconsistent with liquidity-based explanations. The underpricing has increased considerably during the financial crisis and has remained at an elevated level since. The European Central Bank's asset purchase programs have, if anything, led to a decrease in underpricing. We also show that secondary market liquidity in the Eurozone bond markets is significantly lower in the post-crisis period than pre-crisis. The decrease in liquidity is consistent with recent US evidence and may be an unintended side effect of new regulation enacted in the wake of the financial crisis, such as Basel III and the Volcker Rule.
Discussant: Schuster, Philipp (Karlsruhe Institute of Technology)
Session A3: Boards and CEOs
Location: HS13, Time: Friday, 09:00 Chair: Scholz-Daneshgari, Meik (Karlsruhe Institute of Technology)
On the Choice of CEO Duality: Evidence from a Mandatory Disclosure Regulation
Authors: Goergen, Marc1,5; Limbach, Peter2,4; Scholz-Daneshgari, Meik3
Institution: 1: IE Business School; 2: Universität zu Köln; 3: Karlsruhe Institute of Technology; 4: Centre for Financial Research; 5: European Corporate Governance Institute
Using the introduction of new SEC disclosure rules in 2009, this paper studies the reasons of S&P500 companies to combine or separate the CEO and chairman positions. Two-day abnormal returns to equity holders suggest differences in the
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information value of individual disclosed reasons. Cross-sectional heterogeneity in stock market reactions indicates that investors evaluate each reason conditional on the firm’s specific circumstances and characteristics. We further document that sections on board leadership structure differ in terms of their textual characteristics across duality and non-duality firms. Sections of firms with duality contain on average 18% more words and make more frequently use of positive as well as negative words. A comparison of the textual similarity of the current and following year sections does not indicate opportunistic or strategic disclosure.
Discussant: Retting, Laura Rebecca (Westfälische Wilhelms-Universität Münster)
Top Management Team Optimism and Its Influence on Firms’ Financing and Investment Decisions
Authors: Rettig, Laura Rebecca1; Heizer, Tobias2
Institution: 1: Westfälische Wilhelms-Universität Münster; 2: Ludwig-Maximilians-Universität München
This paper examines the influence of optimism among the top management team on corporate investment and financing decisions. We develop an optimism measure based on voluntary insider transactions that is applicable to all of a firm’s officers and directors. Our results suggest that corporate policies are not solely in-fluenced by an individual CEO’s optimism, but rather driven by the attitudes of top management team members as a group. In fact, we find that the impact of CEO optimism on corporate investment and financing decisions depends on the optimism of other officers and/or directors. In contrast, if several other officers and/or directors apart from the CEO are optimistic, their influence is significant, independent of CEO optimism. Our analyses include all public US companies within the Compustat universe for a time span of 20 years.
Discussant: Florysiak, David (University of Southern Denmark)
The Effect of Managerial Entrenchment on Competitors: Evidence from Exogenous Shocks
Authors: Twardawski, Torsten; Kind, Axel; Younes, Nadja
Institution: Universität Konstanz
This paper studies the existence of spillover effects of managerial entrenchment on competing firms. To this aim, we exploit an exogenous reduction of managerial entrenchment triggered by sudden deaths of entrenched CEOs. We document
13
significantly positive abnormal announcement returns both for the focal Firms and their competitors. The market expectations for competing firms mirror subsequent increases in operating performance, risk taking, and sales margins. We confirm the positive value effects using close votes on entrenchment-related shareholder proposals as an alternative entrenchment shock. The study suggests that both focal and competing firms benefit from a reduction in managerial entrenchment.
Discussant: Scholz-Daneshgari, Meik (Karlsruhe Institute of Technology)
Session A4: Analysts and Rating Agencies
Location: HZ201, Time: Friday, 09:00 Chair: Hoffmann, Ingo (Heinrich-Heine-Universität Düsseldorf)
The Effect of Analysts` Inaccuracy on Estimates of Cost of Capital
Authors: Azevedo, Vitor; Kaserer, Christoph
Institution: Technische Universität München
The implied cost of capital (ICC) is widely used as a proxy for expected returns. However, an important unsolved puzzle is whether future returns and ICC are weakly correlated due to the underlying assumptions of the valuation models or the inaccuracy of analysts' earnings forecasts. This paper contributes to this puzzle by evaluating the effect of analysts' earnings forecast errors on ICC estimates. To this end, we compare ICC estimated with analysts' forecasts I/B/E/S ICC to Perfect Foresight ICC estimated with ex-post realized earnings. We find that analysts' forecast inaccuracy causes an error of up to 5.21 percentage points in the ICC estimation. Moreover, we show that Perfect Foresight ICC has a strong relation to realized returns, indicating that analysts' forecast errors are the main cause for the low correlation between ICC and realized returns. Finally, we propose a fitted ICC which displays a higher correlation to ex-post realized returns.
Discussant: Röder, Klaus (Universität Regensburg)
14
Rating through-the-cycle: what does the concept imply for rating stability and accuracy?
Authors: Kiff, John2; Kisser, Michael1
Institution: 1: Norwegian School of Economics; 2: International Monetary Fund
Attempting to reduce rating instability, credit rating agencies (CRAs) typically assign ratings on a through-the-cycle (TTC) perspective. Using a simple credit risk model, we explore the tradeoff between rating accuracy and stability by disentangling the long-term horizon focus of the TTC methodology from the empirically documented reluctance of CRAs to update ratings. We find that it is precisely this reluctance to update ratings - and not the stress test component of TTC ratings - that leads to potential rating cliff effects and inferior rating accuracy. Empirical analysis of a large sample of banks’ internal TTC ratings further reinforces this interpretation.
Discussant: Prostakova, Irina (University of Lausanne)
Earnings Forecasts: The Case for Combining Analysts' Estimates with a Mechanical Model
Authors: Azevedo, Vitor1; Bielstein, Patrick2; Gerhart, Manuel1
Institution: 1: Technische Universität München; 2: EDHEC-Risk Institute
We propose a novel method to forecast corporate earnings, which combines the accuracy of analysts' forecasts with the unbiasedness of a mechanical model. We build on recent insights from the earnings forecasts literature to select variables that have predictive power with respect to earnings. Our model outperforms the most popular methods from the literature in terms of forecast accuracy, bias, and earnings response coefficient. Furthermore, using our estimates in the implied cost of capital calculation leads to a substantially stronger correlation with realized returns compared to extant mechanical earnings estimates.
Discussant: Hoffmann, Ingo (Heinrich-Heine-Universität Düsseldorf)
15
Session A5: Experiments
Location: HZ202, Time: Friday, 09:00 Chair: Koziol, Christian (Eberhard Karls Universität Tübingen)
All That Glitters is Not Gold: Salient Returns Misguide Investors
Authors: Goedker, Katrin; Lukas, Moritz
Institution: Universität Hamburg
This paper tests the causal effect of investor attention on investment patterns by means of a controlled laboratory experiment. Our results show that stocks with attention-grabbing returns exhibit higher purchase volumes in the cross-section. Moreover, we find a strong asymmetry in investor attention as shares of stocks with recent extreme negative returns are more likely to be purchased than shares of stocks with recent less extreme negative returns. Comparable patterns are not observed for stocks with extreme positive returns. Attention-driven purchase behavior occurs even in situations in which it reduces investors' wealth. We further track subjects' eye movements and show that individual visual attention mediates our treatment effect.
Discussant: Koser, Christoph (Universitat de Barcelona)
On the dynamics and drivers of countercyclical risk aversion
Authors: Cordes, Henning; Nolte, Sven; Schneider, Judith C.
Institution: Westfälische Wilhelms-Universität Münster
We analyze in a dynamic investment experiment how stock market developments affect risk aversion. In line with previous research on countercyclical risk aversion, we find that participants primed with a stock market bust are significantly more risk averse than participants primed with a boom. Changes in risk aversion are not permanent though: For instance, participants primed with a stock market bust are only more risk averse at first, but significantly less risk averse shortly afterwards, before risk aversion converges to a stable base level in the long run. Using physiological data (pupil dilatation, electrodermal activity, and pulse width), we find evidence that these patterns are induced by a "seesaw" of emotions like fear and
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relief. Our findings provide important implications for how temporary changes in risk aversion and the emotional state shape risk taking behavior and market dynamics in the aftermath of a financial crisis.
Discussant: Laurinaityte, Nora Marija (Goethe-Universität Frankfurt)
Being an expert when there are no experts: The impact of knowledge illusion on probability weighting
Authors: Baars, Maren; Goedde-Menke, Michael
Institution: Westfälische Wilhelms-Universität Münster
This paper provides empirical evidence that individuals engage in less severe probability weighting if they suffer from the illusion of being an expert in a purely random decision situation. We conduct an experiment involving three different gambles, i.e., risky games where objective probabilities are known, no further information-based advantages exist, and outcomes are independent of knowledge. The gambles are chosen based on their popularity (low, medium, high) to induce variation in participants’ perceived expertise. The variation is an illusion though since all objective probabilities are explicitly provided. Our results indicate that this knowledge illusion significantly mitigates probability weighting, offering a novel explanation for the home and local bias observed in equity markets.
Discussant: Koziol, Christian (Eberhard Karls Universität Tübingen)
Session A6: Banking I
Location: HZ203, Time: Friday, 09:00 Chair: Rola-Janicka, Magdalena Anna (University of Amsterdam)
Bank funding costs and capital structure
Authors: Rajan, Aniruddha; Gimber, Andrew Richard
Institution: Bank of England
We study reductions in risk premia when banks adopt safer capital structures. In our baseline specification, a bank with one percentage point more equity and less junior (subordinated) debt on its balance sheet benefits from a 26 basis points lower equity risk premium and a 152 basis points lower junior debt risk premium. Applied to an average balance sheet, these reductions would offset 64% of the higher direct cost of additional equity. Similarly, we find that a bank with one percentage point
17
more junior debt and less senior unsecured debt benefits from a 4 basis points lower senior unsecured debt risk premium, implying a 34% ‘Modigliani–Miller offset’ for junior debt.
Discussant: Schmidt, Christian (Universität Mannheim)
Bank Capital Regulation in a Zero Interest Environment
Author: Döttling, Robin
Institution: Erasmus University Rotterdam
How do near-zero interest rates affect bank competition, risk taking and regulation? I study these questions in a tractable dynamic equilibrium model, in which forward-looking banks compete imperfectly for deposit funding, and deposit insurance may induce excessive risk taking. The zero lower bound on deposit rates (ZLB) makes capital regulation less effective in curbing risk shifting incentives, exactly during times of low interest rates when risk taking incentives are already heightened. The problem is that at the ZLB banks cannot pass on the cost of capital to depositors, such that tight capital requirements erode franchise value, countervailing the usual "skin in the game" effect. As a result, optimal capital requirements vary with the level of interest rates, highlighting a novel interaction between monetary and macro-prudential policies. Complementing existing regulation with policy tools that subsidize the funding cost of banks may improve welfare at the ZLB.
Discussant: Ahnert, Toni (Bank of Canada)
Bank Leverage, Capital Requirements and Banks' Implied Cost of (Equity) Capital
Author: Schmidt, Christian
Institution: Universität Mannheim
Do heightened capital requirements impose private costs on banks by adversely affecting their cost of capital? And if so, does the effect differ across different groups of banks? Using an international sample of listed banks over the period from 1990 to 2017, I find that investors adjust their expected return weakly in accordance with the Modigliani/Miller (1958) Theorem when banks decrease their leverage. The adjustment is stronger for smaller banks, banks with less deposits and when debt is reduced rather than deposits. In both cases the adjustment is not strong enough to keep banks' cost of capital constant which is estimated to increase by 10 to 40bps, marking a relative increase of 2.8% to 12.6%. This finding is confirmed
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when using the 2011 EBA capital exercise as a quasi-natural experiment to identify the impact of capital regulation on bank's cost of capital.
Discussant: Rola-Janicka, Magdalena Anna (University of Amsterdam)
Session B1: Empirical Asset Pricing II
Location: HS11, Time: Friday, 11:00 Chair: Branger, Nicole (Westfälische Wilhelms-Universität Münster)
Multivariate Crash Risk
Authors: Chabi-Yo, Fousseni1; Huggenberger, Markus2; Weigert, Florian3
Institution: 1: University of Massachusetts; 2: Universität Mannheim; 3: Universität St. Gallen
This paper investigates whether multivariate crash risk is priced in the cross-section of expected stock returns. Motivated by a theoretical asset pricing model, we capture the multivariate crash risk of a stock by a measure based on its expected shortfall and its multivariate lower tail dependence with systematic factors. Applying our new approach to the risk factors of the Carhart (1997) model, we find that stocks with a high sensitivity to simultaneous crashes of the market and the momentum factor bear a risk premium which is not explained by traditional asset pricing risk factors. Our results indicate that the multidimensionality of crash risk should be taken into account when pricing financial assets.
Discussant: Prokopczuk, Marcel (Leibniz Universität Hannover)
The Cross-Section of Risk and Return
Authors: Daniel, Kent1,2; Mota, Lira1; Rottke, Simon3,1; Santos, Tano1,2
Institution: 1: Columbia Business School; 2: NBER; 3: Westfälische Wilhelms-Universität Münster
In the Finance literature, a common practice is to create factor-portfolios by sorting on characteristics associated with average returns. We show that the resulting portfolios are likely to capture not only the priced risk associated with the characteristic, but also unpriced risk. We show that the unpriced risk can be hedged out of these factor portfolios using covariance information estimated from past returns. We apply our methodology to hedge out unpriced risk in the Fama and
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French (2015) Five-factor portfolio. We find that the squared Sharpe ratio of the optimal combination of the resulting hedged factor-portfolios is 2.25, compared with 1.3 for the unhedged portfolios.
Discussant: Azevedo, Vitor (Technische Universität München)
Beta Uncertainty
Authors: Hollstein, Fabian1; Prokopczuk, Marcel1,2; Wese Simen, Chardin2
Institution: 1: Leibniz Universität Hannover; 2: University of Reading
A stock's exposure to systematic risk factors is surrounded by substantial uncertainty. Beta uncertainty is both economically and statistically significantly priced in the cross-section of stock returns. Stocks with high beta uncertainty substantially underperform stocks with low beta uncertainty. A two standard deviation increase in beta uncertainty decreases average annual returns by 5.9%. Aggregate beta uncertainty negatively predicts market excess returns in the short and medium term. We evaluate different explanations for this phenomenon, finding support for a disagreement hypothesis as well as an ambiguity hypothesis under slow trading. Our results are robust to using several controls and alternative measures.
Discussant: Branger, Nicole (Westfälische Wilhelms-Universität Münster)
Session B2: Sovereign Debt
Location: HS12, Time: Friday, 11:00 Chair: Gerasimova, Nataliya (Norwegian School of Economics)
The Linkage between Primary- and Secondary Markets for Eurozone Sovereign Debt: Free Flow or Bottleneck?
Authors: Eisl, Alexander1; Ochs, Christian1; Subrahmanyam, Marti G.2
Institution: 1: Wirtschaftsuniversität Wien; 2: NYU Stern School of Business
In this paper, we investigate the consequences of interlinked sovereign bond markets in the Eurozone for the transmission of yields and market conditions. This linkage is established by financial intermediaries, the so-called primary dealers, who participate in sovereign bond auctions, and are also active as market makers in the secondary markets of multiple countries. We develop a model of financially constrained primary dealers that would like to buy newly issued bonds and may
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consider to sell a proportion of their existing inventory, while providing liquidity in the secondary market at the same time. Our model produces optimal inventory levels for the existing- and the newly issued bonds that can be related to predictable price movements around sovereign bond issuances. We empirically analyze these price movements, i.e., how market conditions, individual bond characteristics and the existence of common intermediaries affect the relation between the primary- and secondary markets.
Discussant: Keiber, Karl Ludwig (European University Viadrina)
Equity-Bond Covariance Risk: Pricing and Determinants
Authors: Perras, Patrizia; Wagner, Niklas
Institution: Universität Passau
Motivated by Merton's intertemporal asset pricing model, we derive a conditional model that uses conditional covariance between equity market returns and long-term government bond returns to track time-varying investment opportunities. We find that the covariance risk measure plays a significant role in explaining the time variation of expected returns of both assets, equities and bonds. To identify the factors that drive conditional covariance, we apply a vector autoregressive model where endogenous threshold regime shifts are triggered by stock market uncertainty and expected inflation. Our results show that shocks to stock market and bond market illiquidity exhibit power in predicting aggregate stock and bond returns over a short-term horizon while shocks to inflation also contribute to predict changes in the stock-bond covariance. However, we find a non-linear response of stock-bond covariance to shocks that is associated with different states of uncertainty and expected inflation.
Discussant: Schlag, Christian (Goethe-Universität Frankfurt)
Political Uncertainty and Sovereign Bond Markets
Authors: Handler, Lukas; Jankowitsch, Rainer
Institution: Wirtschaftsuniversität Wien
This paper analyzes the effects of political uncertainty on prices and liquidity of sovereign bonds. We focus on the time period of the European sovereign debt crisis and on Italian government bonds. We study the effect of Euro, G8 and G20 summits together with relevant elections. Focusing on Italy allows us to analyze a major European government bond market based on detailed transaction data, which was
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highly affected by the sovereign debt crisis. In line with the theoretical literature, we find a significant drop in prices in combination with high illiquidity and sell-side pressure before the event. Prices and trading activity start to recover approximately
one month after the event when the impact uncertainty of policy changes resolves. The effects are stronger when uncertainty - measured by the EPU index - is high and the economic conditions are perceived as being weak.
Discussant: Gerasimova, Nataliya (Norwegian School of Economics)
Session B3: Corporate Finance I
Location: HS13, Time: Friday, 11:00 Chair: Limbach, Peter (Universität zu Köln & Centre for Financial Research)
The Long-Term Performance of IPOs, Revisited
Authors: Hoechle, Daniel2; Karthaus, Larissa M.1; Schmid, Markus1
Institution: 1: Universität St. Gallen; 2: University of Applied Sciences and Arts Northwestern Switzerland
Prior research on IPO long-term performance, focusing on three- to five-year post-issue periods, shows that the apparent IPO underperformance disappears when different risk exposures across IPO and mature firms are accounted for by using a Carhart (1997) factor model. We show that a sample of 7,487 U.S. IPOs between 1975 and 2014 continues to significantly underperform mature firms in terms of Carhart-alphas over the first year after going public when using conventional portfolio sorts. This result prevails across various sub-samples, and also withstands a battery of robustness checks extending the Carhart (1997) factor model with multiple firm characteristics in a statistically robust setting. Further econometric tests, however, reveal that the apparently robust IPO underperformance is likely to be the result of omitted, yet persistent, firm-specific factors. Specifically, we find IPO underperformance to disappear when accounting for unobservable hetero-geneity across firms.
Discussant: Kisser, Michael (Norwegian School of Economics)
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Bragging Rights: Does Corporate Boasting Imply Value Creation?
Authors: Chance, Don1; Kothari, Pratik2; Ferris, Stephen2
Institution: 1: Louisiana State University; 2: University of Missouri
We examine all S&P 500 firms over 1999-2014 that publicly characterize their annual performance with extreme positive language. We find that only 18% of such firms increase shareholder value, while nearly 75% have insignificant performance, and the remaining 7% actually destroy shareholder value. Our evidence suggests that firms often base their positive claims on high raw returns or strong relative accounting performance. In comparison to firms that generate positive abnormal returns without boasting, our sample firms tend to have superior accounting performance. These results show that boasting about performance is rarely associated with value creation and is consistent with executive narcissism.
Discussant: Limbach, Peter (Universität zu Köln & Centre for Financial Research)
Clustered IPOs as a Commitment Device
Author: Lassak, Matthias
Institution: Frankfurt School of Finance and Management
I model the strategic interaction of two underwriters’ decisions of accepting IPO mandates of firms with correlated post-IPO values. Underwriters are valuable for firms as their presence in an IPO increases the perceived quality of firms and therefore raises IPO proceeds. Investors, however, take the agency conflict associated with the fee paying structure of IPOs into account and discount the offer price accordingly. By timely clustering of related IPOs across different underwriters, investment banks expose themselves to the outcome of other concurrent IPOs. In this way, underwriters can credibly commit themselves to the marketing of only high-quality firms which pays off in certain circumstances. By that, the model provides an agency based rational for the observed cyclicality in IPOs and implies that underpricing levels may be a function of underwriter syndicate composition.
Discussant: Stolper, Oscar A. (Philipps-Universität Marburg)
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Session B4: Insurance
Location: HZ201, Time: Friday, 11:00 Chair: Gürtler, Marc (Technische Universität Braunschweig)
Loan Insurance, Adverse Selection and Screening
Authors: Ahnert, Toni; Kuncl, Martin
Institution: Bank of Canada
We study loan default insurance when lenders can screen in primary markets at a heterogeneous cost and learn loan quality over time. In equilibrium, low-cost lenders screen loans, while high-cost lenders may insure them. Insured loans are risk-free and always trade in a secondary market, while uninsured loans are subject to adverse selection. Loan insurance reduces the amount of lemons traded in the secondary market for uninsured loans and improves liquidity and welfare. This pecuniary externality implies insufficient loan insurance in equilibrium. A Pigouvian subsidy on loan insurance restores constrained efficiency and dominates a policy of outright loan purchases.
Discussant: Koch, Florian (Technische Universität Braunschweig)
Optimal Insurance Demand – Low Probability, High Consequence versus High Probability, Low Consequence
Authors: Sende, Cathleen1; Mahayni, Antje1; Branger, Nicole2
Institution: 1: Universität Duisburg-Essen; 2: Westfälische Wilhelms-Universität Münster
Empirical studies document a rather low insurance demand for rare catastrophic risks (LPHC – low probability high consequence) and a rather high insurance demand for small but frequent risks (HPLC – high probability low consequence). We explain this puzzle by mental accounting in a basic insurance model with two independent risks. To do so, we consider two optimization problems in which one risk (either LPHC or HPLC) is insurable while the other risk is seen as (uninsurable) background risk. We find that the optimal insurance against LPHC risk can be larger or smaller than the optimal insurance against HPLC risk. This can happen e.g. when the wealth of the investor is small or when the catastrophic loss is large. We provide an intuitive explanation by disentangling the opposing directional effects.
Discussant: Flore, Raphael (Universität zu Köln)
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Natural hedging with fix and floating strike guarantees
Authors: Lubos, Oliver; Mahayni, Antje; Stein, Katharina
Institution: Universität Duisburg-Essen
The paper analyzes minimum return rate guarantees (MRRGs) including fixed guarantee rates prevailing for the whole contract horizon as well as floating guarantee rates which are linked to the interest rate evolution. In a complete arbitrage free market where the asset and bond price dynamics are given by Gaussian processes, we obtain closed form pricing solutions for both guarantee schemes. Differences in the guarantee costs are then explained by the difference of the arbitrage free values of the fix and floating rate guarantees and the difference between cumulated volatilities resulting from forward and simple volatilities. We then consider the perspective of the asset liability management, i.e. we analyze the sensitivities of the asset and liability side against changes in the interest rate. We show that a combination of fix price and floating strike guarantees enables a natural hedge against changes in the interest rate.
Discussant: Gürtler, Marc (Technische Universität Braunschweig)
Session B5: Volatility
Location: HZ202, Time: Friday, 11:00 Chair: Hillert, Alexander (Goethe-Universität Frankfurt)
The Idiosyncratic Volatility Puzzle and its Interplay with Sophisticated and Private Investors
Authors: Mohrschladt, Hannes; Schneider, Judith C.
Institution: Westfälische Wilhelms-Universität Münster
We establish a direct link between the idiosyncratic volatility (IVol) puzzle and the
behavior of sophisticated and private investors. To do so, we employ three option-
based measures of informed trading and attention data from Google Trends. Our
analyses show that the IVol puzzle is particularly driven by a group of overpriced
stocks that can be identified by the use of sophisticated trader opinion. Since IVol
is no perfect mispricing indicator, the option measures can help to distinguish high-
IVol stocks that are overvalued from high-IVol stocks that are not exposed to
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mispricing. We link the origin of the anomaly to the trading activity of irrational
private investors. This supports the intuitive idea that noise trading leads to
mispricing which can be exploited by sophisticated investors at the option market.
Discussant: Uhrig-Homburg, Marliese (Karlsruhe Institute of Technology)
Volatility Noise
Authors: Hofmann, Michael; Uhrig-Homburg, Marliese
Institution: Karlsruhe Institute of Technology
This study shows that fitting errors of implied volatility surfaces are informative
about limits of arbitrage. We quantify the goodness of fit between actually
observed implied volatilities and the corresponding estimates from OptionMetrics'
smoothed volatility surface using root-mean-square errors. In the cross-section of
stocks, this error metric increases in idiosyncratic volatility and several illiquidity
measures. Consequently, we propose a measure for market-wide limits of arbitrage
given by the average of the stock-specific fitting errors. This measure of volatility
noise peaks during episodes of market distress and exhibits sensible correlations to
standard economic state variables. It co-moves with both the conceptually similar
(treasury) noise measure proposed by Hu, Pan and Wang (2013) and a mispricing
measure based on covered interest rate parity deviations, but volatility noise still
contains unique information. Finally, we find that among these measures only
volatility noise constitutes a priced risk factor in returns of managed equity
portfolios.
Discussant: Pozdeev, Igor (NYU Stern School of Business)
Dissecting the idiosyncratic volatility puzzle
Authors: Claußen, Arndt; Dierkes, Maik; Schroen, Sebastian
Institution: Leibniz Universität Hannover
A simple, yet robust regression-based decomposition technique unveils that latent
systematic risk accounts for the largest part of the negative relation between
idiosyncratic risk and subsequent returns, commonly known as the idiosyncratic
volatility puzzle. The systematic component alone explains almost 50% of the puzzle
and when controlling for both components of idiosyncratic risk, the idiosyncratic
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volatility puzzle is short-lived and historically unstable. Our results are robust to the
choice of a factor model and the consideration of well accepted determinants of
expected returns.
Discussant: Hillert, Alexander (Goethe-Universität Frankfurt)
Session B6: Central Banks
Location: HZ203, Time: Friday, 11:00 Chair: Jankowitsch, Rainer (Wirtschaftsuniversität Wien)
Transparency as a remedy of agency problems in securitization? - The Case of ECB's Loan-Level Reporting Initiative.
Authors: Klein, Philipp; Mössinger, Carina; Pfingsten, Andreas
Institution: Westfälische Wilhelms-Universität Münster
There is broad consensus that poor transparency of ABS added substantially to the
latest subprime lending crisis. In response, the ECB introduced a novel loan-level
reporting initiative, obligating originators of ABS to provide quarterly loan-by-loan
information. Does the increase in transparency alleviate the agency problems
inherent in securitization? To the best of our knowledge, this paper is the first to
empirically study the impact of transparency on securitizations with respect to the
pool-level. We take advantage of data from the European DataWarehouse, the
repository of loan-level information under the ECB's initiative, on 108 ABS backed
by more than 2.8 SME loans. Our results show that the increase in transparency
indeed has valuable real effects for investors by inducing originators to select better
pools for securitization. Specifically, pool performance increases in terms of lower
loss, default and delinquency rates. Furthermore, pool diversification rises in terms
of borrower size and business type.
Discussant: Franke, Günter (Universität Konstanz)
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A Capital Structure Channel of Monetary Policy
Authors: Große Rüschkamp, Benjamin1; Steffen, Sascha2; Streitz, Daniel3
Institution: 1: European School of Management and Technology Berlin; 2: Frankfurt School of Finance and Management; 3: Copenhagen Business School
We study the transmission channels from central banks’ quantitative easing
programs via the banking sector when central banks start purchasing corporate
bonds. We find evidence consistent with a “capital structure channel” of monetary
policy. The announcement of central bank purchases reduces the bond yields of
firms whose bonds are eligible for central bank purchases. These firms substitute
bank term loans with bond debt, thereby relaxing banks’ lending constraints: banks
with low Tier-1 ratios and high non-performing loans increase lending to private
(and profitable) firms, which experience a growth in capital expenditures and sales.
The credit reallocation increases banks’ risk-taking in corporate credit.
Discussant: Weiß, Patrick (Vienna Graduate School of Finance)
The Euro Crisis and the 24h Pre-ECB Announcement Return
Authors: Ulrich, Maxim; Jakobs, Elmar; May, Lukas; Landwehr,
Institution: Karlsruhe Institute of Technology
We document economically and statistically large 24h pre-ECB announcement re-
turns in European equity. For selected industries, such as the European banking sec-
tor, the respective annual premium (2010 – 2015) was 12% (Sharpe ratio of 1.6); at
a time when the annual return of the European banking sector was on average flat
(lost decade). Concerns of an upcoming Euro-zone break-up explains 25% of the 24h
pre- ECB announcement premium. After the ’whatever it takes’ promise of ECB
Chairman Mario Draghi, our measures for uncertainty of a Euro-zone break-up
declined significantly, together with the 24h pre-ECB announcement premium.
Discussant: Jankowitsch, Rainer (Wirtschaftsuniversität Wien)
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Poster Session:
Location: Foyer, Time: Friday, 12:30
Politics and Corporate Investments
Author: Severin, Peter Heinz
Institution: Universität Mannheim
I investigate companies’ investment behavior under different governments in a multi-party representative democracy. Theory suggests that, unlike in two-party democratic systems, policy outcomes may differ under more diverse representation. For identification, I employ a Regression Discontinuity Design around close municipal elections in Germany. I find that companies that are subjected to left-wing governments significantly decrease their investments by 15.50% compared to companies subjected to right-wing governments. This finding is robust across parametric and non-parametric tests.
Monopoly Power in the Oil Market and the Macroeconomy
Authors: Branger, Nicole; Flacke, René Marian; Gräber, Nikolai
Institution: Westfälische Wilhelms-Universität Münster
This paper studies macroeconomic consequences of oil price fluctuations caused by innovations in the monopoly power in the oil market. Monopoly power is interpreted as oil producers’ ability to charge markups over marginal costs. We propose a novel way to identify markup shocks based on meetings of the OPEC and show their unique macroeconomic consequences compared to supply and demand shocks. In particular, global real economic activity persistently expands when oil producers’ monopoly power rises. A general equilibrium model suggests that higher monopoly profits attract investments in oil producing capital which drive down marginal costs and thereby stimulate economic growth.
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Role of CEOs’ Educational Background in Convertible Bond Issuance Decisions
Authors: Mehmood, Zainab; Dutordoir, Marie; De Cesari, Amedeo
Institution: Alliance Manchester Business School
We examine the effect of U.S. CEOs’ education on their firms’ likelihood of issuing convertible debt instead of straight debt and equity. We find that CEOs with a higher level of education are more likely to issue convertible debt, particularly when such action is beneficial to their firms. However, CEOs with an MBA degree are less likely to rely on convertibles, consistent with the assumption that an MBA might dampen non-standard corporate finance choices. Our findings are consistent with the upper echelon theory which suggests that better educated executives are more innovative and make more optimal corporate finance choices. The findings withstand a range of robustness tests.
Leverage Implied Risk and its Impact on Equity Anomalies
Author: Zimmermann, Lukas
Institution: Universität Mannheim
I study whether systematic risk implied by a firm’s financial and operating leverage impacts the value, investment and profitability premium. Using changes in US state tax levels as exogenous shock on the riskiness of financial leverage, I demonstrate that the magnitude of both the book-to-market and investment premium changes in response for firms exposed to the shocks. Subsequently, motivated by propositions in the theoretical literature, and building on the link between investment, profitability and returns from q-theory, I consider whether these characteristics can jointly be related to leverage implied risk and whether this risk explains the redundancy of book-to-market, investment and profitability based factors and anomalies. Applying factors constructed from variables theoretically proposed to be underlyings of leverage implied risk, I show that systematic risk that impacts cash flows and volatility of returns can be related to these premiums.
Do Regulatory Capital Requirements Matter for Bond Yields?
Authors: Claussen, Catharina; Kriebel, Johannes Maximilian; Pfingsten, Andreas
Institution: Westfälische Wilhelms-Universität Münster
This paper assesses the effect of banking regulation on bond yields. The costs for banks associated with capital requirements for holding bonds may lead to the demand for a higher compensatory yield. As government debt in particular is
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treated preferentially, capital costs may determine part of the spread between corporate and government bonds. We introduce a new measure for approximating the part of the spread that is induced by regulatory capital costs. Using German bond price data, we find that the costs associated with capital requirements explain a substantial fraction of the credit spread. Our findings contribute to the debate on whether to abolish the preferential treatment of government bonds in banking regulation and are of relevance for policymakers, banks and investors.
Break-Even Inflation Rates for the Euro Area
Author: Speck, Christian
Institution: Deutsche Bundesbank
Market-based inflation expectations are important indicators for the business cycle and for the effectiveness and credibility of monetary policy. In this paper I combine inflation-indexed bonds issued by different euro area countries and determine a consistent joint term structure of break-even inflation rates (BEIR) for the whole euro area and liquidity proxies since 2004. In spanning regressions the information content of market-based inflation outlook for the euro area is studied. There is (unspanned) information in survey forecasts of inflation that is neither contained in the cross section of the new bond-based dataset nor in inflation swaps. The survey information that is missing in BEIR and liquidity indicators helps to predict future returns of inflation indexed bonds. For policy analysis, the potential presence of unspanned factors requires a careful interpretation of BEIR and requires the implementation of sufficiently flexible dynamic term structure models to account for unspanned information.
Using the Extremal Index for Value-At-Risk Backtesting
Authors: Bücher, Axel2; Schmidtke, Philipp1; Posch Peter1
Institution: 1: Technische Universität Dortmund; 2: Ruhr-Universität Bochum
We introduce a new value at risk forecasting backtest by establishing a connection between the independence property of value at risk forecasts and a general measure of extremal clustering of stationary sequences (extremal index). We introduce a sequence of relative excess returns whose extremal index has to be estimated. We compare our backtest to both popular and recent competitors using Monte-Carlo simulations and find considerable power. For example, the new test allows the rejection of the popular unconditional Historical Simulation method more frequent.
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Currency Risk Premia in Emerging Markets
Author: Kranner, Stephan
Institution: Wirtschaftsuniversität Wien
Understanding the dynamics of time-varying currency risk premia is the central issue of current empirical FX research. Since most findings, however, are based on developed market currencies, this paper contributes in such a way that it explicitly analyzes the specific dynamics of emerging market (EM) currencies. We use the well documented Harrod-Balassa-Samuelson effect to relax the assumption of long-run purchasing power parity, which cannot be assumed to hold for EM economies. While the interest rate differential is the best positive predictor of short-run currency returns, the real exchange rate (RER) is a better negative predictor over longer horizons. We document that the positive relation between the interest rate differential and the currency risk premia starts to reverse earlier for EM currencies. Besides that, we show that the most negative 12-months ahead currency returns are significantly predicted by the combination of a high interest rate differential and a high RER.
Does Corporate Social Responsibility Impact Risk?
Authors: Monti, Alice1; Pattitoni, Pierpaolo1; Petracci, Barbara1; Randl, Otto2
Institution: 1: University of Bologna; 2: Wirtschaftsuniversität Wien
We investigate the relationship between corporate social responsibility (CSR) and risk, using measures that capture systematic, idiosyncratic, downside and extreme risks. We analyze the aggregate CSR score as well as its subdimensions. We base our analysis on a large panel of listed firms from 52 countries in the period 2002-2015 and use GMM estimators that allow considering both autoregressive memory in risk measures and possible endogeneity of CSR. Our findings show that CSR has a risk-reducing effect on risk. This effect is stronger in civil-law countries with low security regulation and disclosure requirement levels and in countries where financial information is less widespread. Firms in high-impact or high-profile industries benefit more from CSR than firms in other industries. Similar benefits apply to firms that are not cross-listed. Finally, the financial crisis has increased the risk-reducing effect of CSR.
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The Effects of Leverage Ratio Adjustment on Banks' Balance Sheets: Impact of the Risk Measurement Approach
Authors: Maidl, Christoph; Woyand, Corinna
Institution: Westfälische Wilhelms-Universität Münster
We examine the effects of the recently introduced regulatory leverage ratio, which aims to backstop existing risk-weighted capital requirements, on banks’ balance sheets. We observe on average a deleveraging process, while banks simultaneously increase their risk-weighted assets. Facing less regulatory leeway banks applying the standard approach are more inclined to raise capital in order to adjust the leverage ratio upwards. This implies that such banks become more stable as intended by policy makers. In contrast, the need to raise capital is significantly less pronounced for banks using internal models, which stronger reduce the total exposure measure.
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Session C1: Asset Management
Location: HS11, Time: Friday, 14:00 Chair: Rohleder, Martin (Universität Augsburg)
Diseconomies of Scale, Information Processing and Hierarchy Costs: Evidence from Asset Management
Authors: Evans, Richard2; Rohleder, Martin1; Tentesch, Hendrik1; Wilkens, Marco1
Institution: 1: Universität Augsburg; 2: University of Virginia, Darden School of Business
Previous research has suggested that information processing and hierarchy costs
play a role in firm-level diseconomies of scale. Using separate accounts (SAs) as a
laboratory, we examine if these costs vary across investment approach
(quantitative vs. fundamental) and what role they play in producing diseconomies
of scale. Consistent with lower hierarchy, the average investment professional (e.g.,
portfolio manager, research analyst, and trader) at a quantitative advisor manages
two to three times more assets than fundamental advisors. Consistent with greater
use of hard information and lower information processing costs, quant SAs show
higher factor model R2, more stable factor loadings and higher information
diffusion speed. On this basis, we show that the performance of quant SAs is
unrelated to size while fundamental SAs exhibit statistically and economically
significant diseconomies of scale. Overall, our results suggest that information
processing and hierarchy costs are a source of diseconomies of scale in general.
Discussant: Randl, Otto (Wirtschaftsuniversität Wien)
The Impact of Labor Mobility Restrictions on Managerial Actions: Evidence from the Mutual Fund Industry
Authors: Cici, Gjergji1; Hendriock, Mario2,3; Kempf, Alexander2,3
Institution: 1: Raymond A. Mason School of Business; 2: Universität zu Köln; 3: Centre for Financial Research
We examine how labor mobility restrictions such as non-compete clauses in
employment contracts affect the behavior of employees pertaining to career
concerns. Using the investment industry as a testing laboratory, we find that
heightened career concerns due to increased enforceability of non-compete
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clauses strongly affect the behavior of mutual fund managers. The resulting
stronger career concerns discipline managers, inducing them to exert more effort,
which improves performance, and to temper their risk-taking, which results in lower
portfolio risk, less tournament-like behavior, and more herding. Fund managers
also increase window-dressing, suggesting that they resort to asset gathering to
increase job security.
Discussant: Löffler, Gunter (Universität Ulm)
House of Funds
Author: Gerasimova, Nataliya
Institution: Norwegian School of Economics
I document that political connections are an important driver of investment
strategies of U.S. mutual funds. I collect data on mutual fund holdings of U.S.
Congress members and equity holdings of mutual funds from 2004 to 2013. I show
that funds which have politicians among investors place larger bets and trade more
actively in stocks of politically sensitive firms, and in stocks of firms that operate in
industries under the scope of politicians’ congressional committees. In addition, a
portfolio long in politically sensitive stocks and short in all remaining stocks earns
abnormal return of over 75 basis points per quarter.
Discussant: Rohleder, Martin (Universität Augsburg)
Session C2: Behavioral Finance I
Location: HS12, Time: Friday, 14:00 Chair: Breuer, Wolfgang (RWTH Aachen)
Social network communications, noise traders and market efficiency
Author: Tran, Vu
Institution: Swansea University
This paper presents an extension of the noise-trader model by incorporating
network communications and interactions between investors. Market efficiency
critically depends on a time-varying mass of noise traders and uncertainty of the
mass. Rational investors require premiums for bearing both the unpredictability of
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noise traders’ misperceptions and the unpredicted mass of noises. Empirical
investigations based on indices of 78 international stock markets show time-varying
serial correlations and violations of random walks. The evidence of market
inefficiencies and mispricing are significantly related to a proxy for mass of noise
trades. Our paper demonstrates the need for more sociable approaches in financial
modelling.
Discussant: Zimmermann, Lukas (Universität Mannheim)
The determinants of discounting in intergenerational decision-making
Authors: Breuer, Wolfgang; Müller, Torbjörn Anton; Sachsenhausen, Eric
Institution: RWTH Aachen
We investigate discounting behavior in situations where both intertemporal and
social discounting occur simultaneously. Situations of intergenerational conflicts
are characterized by both time delay and social distance. Therefore, we formalize
this situation based on a discounted utility model and construct an experimental
setting where we analyze economic decision making in situations where
participants decide between their own consumption now and future consumption
of others. We find that immediate rewards lead participants to discount stronger in
such intergenerational decision problems than would be expected, given their
separately determined social and intertemporal discount factors. In a delegated
setting where no immediate rewards are possible, this difference cannot be
identified. The findings are relevant for policy makers and researchers alike. To
ensure that decision-makers allocate resources to future generations to foster
sustainable development, our findings suggest separating the intertemporal and
the “social” decision.
Discussant: Handler, Lukas (Wirtschaftsuniversität Wien)
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Pricing Sin Stocks: Ethical Preference vs. Risk Aversion
Authors: Curatola, Giuliano1,4; Colonnello, Stefano2,5; Gioffré, Alessandro3,4
Institution: 1: Goethe-Universität Frankfurt; 2: Otto-von-Guericke-Universität Magdeburg; 3: University of Florence; 4: Research Center SAFE; 5: Halle Institute for Economic Research
We develop a model that reproduces the average return and volatility spread
between sin and non-sin stocks. Our investors do not necessarily boycott sin
companies. Rather, they are open to invest in any company while trading off
dividends against ethicalness. We show that when dividends and ethicalness are
complementary goods and investors are sufficiently risk averse, the model predicts
that the dividend share of sin companies exhibits a positive relation with the future
return and volatility spreads. Our empirical analysis supports the model's
predictions.
Discussant: Tran, Vu (Swansea University)
Session C3: Corporate Finance II
Location: HS13, Time: Friday, 14:00 Chair: Ruckes, Martin (Karlsruhe Institute of Technology)
The Maturity Premium
Authors: Chaderina, Maria1; Weiß, Patrick2,1; Zechner, Josef1
Institution: 1: Wirtschaftsuniversität Wien; 2: Vienna Graduate School of Finance
We analyze asset-pricing implications of debt maturity. On the one hand, firms
financed with short-term debt are more exposed to rollover risk. On the other hand,
firms financed with long-term debt have weaker incentives to delever after negative
shocks and thus exhibit high leverage during downturns. The resulting increase in
beta is a risk for which shareholders require compensation. As a result long-term
financed firms have higher expected returns than short-term financed firms,
controlling for the average systematic risk exposure. We demonstrate this in a
model and document empirically a 0.21% monthly premium for buying long-
maturity financed firms and selling short-maturity financed firms.
Discussant: Karthaus, Larissa (Universität St. Gallen)
37
Capital Structure Decisions in the Supplier-Customer Network
Author: Prostakova, Irina
Institution: University of Lausanne
We explore network effects in capital structure decision making. The economy is
presented as a set of nodes (industries) and edges (trading links between them).
First, we propose a simple theoretical setup which allows us to illustrate numerically
joint dynamics of optimal capital structure choices with respect to agents’
characteristics and the intensity of input-output links.We find that the position of
an industry in the network affects its capital structure policy. The more suppliers or
customers an industry has or the more connected to other industries it is, the higher
its leverage becomes. Our second finding is a positive dependence between partner
industries’ leverages. It implies that industries with highly levered partners are
prone to keep higher leverage. This result supports the theory that leverage is partly
used as an instrument to improve an economic agent’s bargaining position. The
results are confirmed under multiple robustness checks.
Discussant: Lassak, Matthias (Frankfurt School of Finance and Management)
Finding market timing patterns when they are unlikely to exist
Authors: Kisser, Michael; Rapushi, Loreta
Institution: Norwegian School of Economics
We show that periods during which firms issue equity and simultaneously retire
debt reflect market timing patterns: such leverage decreasing recapitalizations
(LDRs) occur during periods of high equity valuation which subsequently decrease.
Nevertheless, market timing is unlikely to explain those issues as the documented
pattern also persists in case creditors likely have substantial control rights - such as
firms with high leverage or those violating financial covenants. Instead, we show
that the subsequent decrease in valuation ratios is driven by physical investment
which is consistent with an ex-post exercise of growth options. This interpretation
is further supported by asset pricing tests.
Discussant: Ruckes, Martin (Karlsruhe Institute of Technology)
38
Session C4: Market Microstructure I
Location: HZ201, Time: Friday, 14:00 Chair: Draus, Sarah (Erasmus University Rotterdam)
High Frequency Trading and the Dynamics of Price Informativeness
Author: Draus, Sarah
Institution: Erasmus University Rotterdam
I develop a multi-period trading model to analyze how a fundamental trader adjusts
his trading strategies and information production decisions to the existence of high
frequency trading (HFT). I show that these decisions differ strongly depending on
the type of information that the HFT can observe. Information correlated with past
trading activity reduces fundamental trading and information production, and leads
to persistently lower price informativeness than in a benchmark without HFT. HFT
information correlated with fundamental information does not induce these
effects, and prices may become more informative on average. However, fast price
discovery may come at the cost of lower price informativeness in the long run. My
results are consistent with empirical findings highlighting that HFT enhances price
discovery in the short run, and others suggesting that HFT reduces the ability of
prices to reflect long-term fundamental information.
Discussant: Ochs, Christian (Wirtschaftsuniversität Wien)
The effects of uncertainty on market liquidity: Evidence from Hurricane Sandy
Authors: Rehse, Dominik1; Riordan, Ryan2; Rottke, Nico3; Zietz, Joachim4
Institution: 1: Zentrum für Europäische Wirtschaftsforschung; 2: Queen's University; 3: aamundo; 4: EBS Business School
We test the effects of uncertainty on market liquidity using Hurricane Sandy as a
natural experiment. Given the unprecedented strength, scale and nature of the
storm, the potential damages of a landfall near the Greater New York area were
unpredictable and therefore uncertain. Using a difference-in-differences setting,
we compare the market reactions of Real Estate Investment Trusts (REITs) with and
without properties in the widely-published evacuation zone of New York City prior
39
to landfall. We find relatively less trading and wider bid-ask spreads in affected
REITs. The results confirm theory on the detrimental effects of uncertainty on
market functioning.
Discussant: Theissen, Erik (Universität Mannheim)
Call of Duty: Designated Market Maker Participation in Call Auctions
Authors: Theissen, Erik1; Westheide, Christian1,2
Institution: 1: Universität Mannheim; 2: Research Center SAFE
Most modern equity markets operate electronic platforms which organize trading
in a hybrid form comprising both continuous trading sessions and call auctions. On
many of these markets, designated market makers (DMMs) supply additional
liquidity for small and mid cap stocks. Whereas prior research has focused on their
role in continuous trading, we analyze their activity in call auctions. Using data from
Germany's Xetra system, we find that DMMs are most active when they can provide
the greatest benefits to the market, i.e., in relatively illiquid stocks and at times of
elevated volatility. They stabilize prices and trade profitably. These results imply
that DMMs provide a valuable service to the market, and that they charge an
implicit price for that service.
Discussant: Draus, Sarah (Erasmus University Rotterdam)
Session C5: International Finance
Location: HZ202, Time: Friday, 14:00 Chair: Schäfer, Larissa (Frankfurt School of Finance & Management)
Monetary Policy and Currency Returns: the Foresight Saga
Authors: Pozdeev, Igor1; Borisenko, Dmitry2
Institution: 1: NYU Stern School of Business; 2: Universität St. Gallen
We document a drift in exchange rates before monetary policy changes across
major economies. Currencies tend to depreciate by 0.8 percent over ten days
before policy rate cuts and appreciate by 0.5 percent before policy rate increases.
We show that monetary policy decisions are almost perfectly forecastable and thus
that the above drift is exploitable by investors. Our baseline specification of a
40
trading strategy constructed by going long in currencies against USD before
predicted local interest rate hikes and short in currencies before predicted cuts
earns on average a statistically significant excess return of 40 basis points per ten-
day period after trading costs. We demonstrate that this return is robust to the
strategy specification and cannot be attributed to variations in the FX market
implied volatility, liquidity, and business cycle indicators, nor does it appear less
significant after controlling for several established FX and equity risk premia.
Discussant: Reschenhofer, Christoph (Wirtschaftsuniversität Wien)
Up- and Downside Variance Risk Premia in Global Equity Markets
Authors: Held, Matthias2; Kapraun, Julia1; Omachel, Marcel2; Thimme, Julian1
Institution: 1: Goethe-Universität Frankfurt; 2: WHU - Otto Beisheim School of Management
This paper provides novel insights into the variance risk premium by disaggregating
it into an upper and a lower parts. Across a set of global stock market indices, we
find that the variance premium is almost exclusively driven by downside risk, i.e.,
by the left tail of the index return distribution. Considering the term structure of
semivariance premia we reveal large differences in levels and slopes across
different markets. Further, we condition the premia on several variables and find
the upper premium to be non-zero only in bad states, while the lower premium
exists in all states. Finally, we include different thresholds for decomposition of the
total premium and observe that lower semivariance premia predominantly
compensate investors for taking risks of large negative return innovations.
Discussant: Huggenberger, Markus (Universität Mannheim)
”Brexit” and the Contraction of Syndicated Lending
Authors: Schäfer, Larissa1; Berg, Tobias1; Saunders, Anthony2; Steffen, Sascha1
Institution: 1: Frankfurt School of Finance and Management; 2: NYU Stern School of Business
We analyze the effect of policy uncertainty on global syndicated loan markets using
the “Brexit vote” – the vote of the UK citizens to leave the European Union – as a
laboratory. Issuances in the UK syndicated loan market drop by 23% after the Brexit
41
vote relative to a set of comparable syndicated loan markets. We propose a new
matching strategy – “Siamese Twins Matching” – to identify appropriate
counterfactuals for the UK market. We further analyze a novel channel, market
attractiveness: firm-bank combinations that used to issue loans in both the UK
market and other markets do not decrease their issuances in the UK market more
than in other markets after the Brexit referendum – suggesting that the UK market
did not significantly lose attractiveness relative to other international markets. Our
results help to understand the dynamics of competition between financial centers
and the role of policy uncertainty shocks in this competition.
Discussant: Lawrenz, Jochen (Leopold-Franzens-Universität Innsbruck)
Session C6: Financial Intermediation
Location: HZ203, Time: Friday, 14:00 Chair: Gimber, Andrew Richard (Bank of England)
The Value of Lending Relationships when Creditors are in Control
Author: Keil, Jan
Institution: University of the West Indies
Research has shown that relationship banking matters for borrowers. In this article
I utilize a regression discontinuity design to provide evidence that a concrete
channel, the reallocation of control rights to creditors following a covenant
violation, explains some positive effects relationship lending has on borrowers.
Investment experiences a smaller reduction and the likelihood of a company exit
increases less dramatically when there are well developed relationships. Exploring
which exact lender actions are responsible for these results, I find that relationship
banks are more willing to renegotiate loans, extend maturities, ramp up volumes
and grant covenant waivers upon violations.
Discussant: Klein, Philipp (Westfälische Wilhelms-Universität Münster)
42
On the ranking consistency of global systemic risk measures: empirical evidence
Authors: Abendschein, Michael; Grundke, Peter
Institution: Universität Osnabrück
We empirically analyze to which extent popular global systemic risk measures
(SRMs) yield comparable results with respect to the systemic importance of a
financial institution and, in particular, from which determinants the degree of
consistency of the classification by the various SRMs depends. In this study, we
investigate the rank correlations of SRMs in order to detect common drivers that
might explain (in-)consistent ranking outcomes. This could allow to facilitate the
interpretation of the outcome of SRMs and to increase the reliability of their usage
in academic and practical applications. Our results show that rank correlations are
particularly sensitive towards a bank’s leverage and towards tightening economic
conditions. This finding holds across various different specifications.
Discussant: Schmidtke, Philipp (Technische Universität Dortmund)
Seeking Safety: A theory of demandable debt
Authors: Ahnert, Toni1; Perotti, Enrico2
Institution: 1: Bank of Canada; 2: University of Amsterdam
The scale of safe assets suggests a structural demand for a safe wealth share beyond
transaction and liquidity roles. We study how investors achieve a reference wealth
level by combining self-insurance and contingent liquidation of investment.
Intermediaries improve upon autarky, insuring investors with poor self-insurance
and limiting liquidation. However, delegation creates a conflict in states with
residual risk. Demandable debt ensures safety-seeking investors can withdraw to
implement a safe outcome, so private safety provision is fragile. Public debt crowds
out private credit supply and investment, while deposit insurance crowds them in
by reducing liquidation in residual risk states.
Discussant: Gimber, Andrew Richard (Bank of England)
43
Session D1: Asset Management and Household Finance
Location: HS11, Time: Saturday, 09:00 Chair: Boehmer, Ekkehart (Singapore Management University)
Knowing Me, Knowing You? Similarity to the CEO and Fund Managers’ Investment Decisions
Authors: Jaspersen, Stefan1,2; Limbach, Peter1,2
Institution: 1: Universität zu Köln; 2: Centre for Financial Research
This study provides evidence that investors’ demographic similarity to CEOs affects
their investment decisions. We find that mutual fund managers overweight firms
led by CEOs who resemble them in terms of age, ethnicity and gender. This finding
is robust to excluding educational and local ties and is supported by variation in
similarity caused by CEO departures. Investing in firms run by similar CEOs, on
average, is associated with superior performance and is more pronounced when
CEOs have more impact on their firms. Results suggest that demographic similarity
to CEOs facilitates informed trading, implying that investors’ information
production incorporates firm management.
Discussant: Liu, Xin (University of Bath)
The Construction of International Equity Portfolios by Decomposing Global Momentum Returns.
Author: Reschenhofer, Christoph
Institution: Wirtschaftsuniversität Wien
Using a parametric portfolio optimization approach, I show the construction of an
international diversified equity portfolio. The optimal portfolio weights are
modeled as a function of distinct components of momentum returns. A zero-cost
strategy overweighting equity markets with positive momentum, a depreciating
currency and low inflation rates exhibits significant excess returns and is robust to
various extensions and modifications.
Discussant: Hoechle, Daniel (FHNW School of Business)
44
Hedging Recessions
Authors: Branger, Nicole2; Larsen, Linda Sandris1; Munk, Claus1
Institution: 1: Copenhagen Business School, Denmark; 2: Westfälische Wilhelms-Universität Münster
Traditional life-cycle models conclude that consumer-investors should be fully
invested in stocks when young - in contrast to observed stock holdings – and
gradually replace stocks with bonds as retirement approaches. We show that a
careful modeling of business cycle and unemployment risks reduces early-life stock
holdings dramatically, and sometimes even to zero in line with observed non-
participation. The reduction is driven by the high unemployment risk of young
adults, the negative influence of unemployment on future salaries, and the business
cycle variations in stock prices and unemployment risk leaving human capital riskier
and more stock-like.
Discussant: Boehmer, Ekkehard (Singapore Management University)
Session D2: Asset Pricing Theory
Location: HS12, Time: Saturday, 09:00 Chair: George, Ammu (Nanyang Technological University)
Downside Risks and the Price of Variance Uncertainty
Authors: Lorenz, Friedrich1; Schumacher, Malte2
Institution: 1: Westfälische Wilhelms-Universität Münster; 2: Universität Zürich
This paper studies the role of generalized disappointment aversion (GDA) in
reconciling several asset-pricing puzzles in models of long-run risks. To fully capture
the nonlinearities introduced by these preferences, we solve the model globally
with projection. This allows us to scrutinize the channels through which GDA
unfolds. A key feature of our calibrated model is the significant wedge GDA drives
between the physical and the risk-neutral measure. The model captures not only
the size of the variance risk premium (VRP), but also the hump-shaped predictability
pattern and the prominent role of downside risks for the VRP and its predictive
power.
Discussant: Hiraki, Kazuhiro (Queen Mary University of London)
45
Multidimensional Skin in the Game
Authors: Koch, Florian; Gürtler, Marc
Institution: Technische Universität Braunschweig
We analyze the alignment of monitoring incentives between an originator and
investors in a securitization setting. Unlike previous studies, we consider retention
in multiple dimensions, and allow retention design to simultaneously account for
refunding and risk transfer. We present a leveled-commitment approach to assess
the originator’s monitoring incentives under multidimensional retention. Besides,
we disentangle the commitment and signaling functions of retention, which yield
notably different types of market equilibria. We show that the horizontal dimension
of retention is optimal rather in equilibria in which considerable commitment is
implemented. Finally, as the equilibria exhibit different sources of welfare losses,
we discuss the optimal regulation of securitization markets. The manifold effects of
multidimensional retention design on welfare attest to the importance of
understanding such retention.
Discussant: Scherrmann, Moritz (Ludwig-Maximilians-Universität München)
Asset Prices, Growth and Wage Inertia
Authors: George, Ammu; Alba, Joseph D.
Institution: Nanyang Technological University
This paper examines the implications of wage inertia on macroeconomic aggregates
and asset prices in a production economy in which growth is determined by
innovation as developed by Kung and Schmid (2015). Wage inertia such as wage
stickiness with endogenous labor supply (Uhlig (2007) and Donadelli and Gruning
(2016)) and search and matching models with Nash and with alternative offer
bargaining (AOB) (Christiano et al. (2016)) are incorporated in the Kung and Schmid
(KS) model. Following a positive productivity shock, the AOB model shows labor
market and asset pricing moments closer to the data compared to other types of
models with wage inertia and the benchmark KS model. In addition, the impulse
response of dividends is larger – and closer to the data - under AOB compared to
the other models since wages rise the least, as labor, vacancies and unemployment
are more responsive following a positive productivity shock.
Discussant: Lorenz, Friedrich (Westfälische Wilhelms-Universität Münster)
46
Session D3: Syndicated Lending
Location: HS13, Time: Saturday, 09:00 Chair: Berg, Tobias (Frankfurt School of Finance & Management)
Loan Syndication Structures and Price Collusion
Authors: Eidam, Frederik1,4,5; Cai, Jian2; Saunders, Anthony3; Steffen, Sascha4
Institution: 1: Universität Mannheim; 2: Washington University, St. Louis; 3: NYU Stern School of Business; 4: Frankfurt School of Finance and Management; 5: Zentrum für Europäische Wirtschaftsforschung
How does the organizational form of loan syndicates evolve and what are the
effects on price collusion? We develop a novel measure of distance in lending
expertise among syndicate lenders, and relate this novel measure to the
organizational form of loan syndicates and loan pricing. Studying the U.S.
syndicated loan market from 1989-2017, we find that the organizational form of
loan syndicates significantly varies across our lender measure based on similar
specializations in lending which we call syndicated distance. Large lead arrangers
prefer to form close and concentrated syndicates. Analyzing loan pricing, we find
that concentrated syndicates possess improved screening abilities, but collude on
loan pricing. Consistent with Hatfield et al. (2017), we find however that price
collusion of concentrated syndicates only occurs during periods of low market
concentration. Our findings imply that both the organizational form of loan
syndicates and the level of market concentration affect price collusion.
Discussant: Elsas, Ralf (Ludwig-Maximilans-Universität München)
US stress tests and bank risk-taking: evidence from the syndicated loan market
Author: Naiborhu, Elis Deriantino
Institution: Bank Indonesia, University of Warwick
I evaluate the role of the prudential supervisory stress tests on the US banks (BHC)
risk-taking in the syndicated loan market. I utilize the difference-in-difference
method on a loan level data over 2002-2015. The outcomes suggest that stress tests
do not necessarily contain banks’ ex-ante risk-taking in the syndicated loan market.
Stress-tested BHCs have higher loan spreads and exposures in the domestic market
47
than the control banks following the stress tests. This evidence is more pronounced
among stress-tested banks with lower capital and profits than those in better
conditions as well as stronger in the presence of greater asymmetric information
between lenders and borrowers.
Discussant: Schäfer, Larissa (Frankfurt School of Finance & Management)
Bank Loan Supply during Crises: The Importance of Geographic Diversification
Authors: Schaz, Philipp1; Doerr, Sebastian2
Institution: 1: Humboldt-Universität zu Berlin; 2: Universität Zürich
We classify a large sample of banks according to the geographic diversification of
their international syndicated loan portfolio. Our results show that diversified banks
maintain higher loan supply during banking crises in borrower countries. The
positive loan supply effects lead to higher investment and employment growth for
firms. Diversified banks are stabilizing due to their ability to raise additional funding
during times of distress, which also shields connected markets from spillovers.
Further distinguishing banks by nationality reveals a pecking order: diversified
domestic banks are the most stable source of funding, while foreign banks with little
diversification are the most fickle. Our findings suggest that the decline in financial
integration since the recent crisis increases countries' vulnerability to local shocks.
Discussant: Berg, Tobias (Frankfurt School of Finance and Management)
Session D4: Market Microstructure II
Location: HZ201, Time: Saturday, 09:00 Chair: Breitkopf, Nikolas (Ludwig-Maximilians-Universität München)
Spoilt for Choice: Order Routing Decisions in Fragmented Equity Markets
Authors: Gomber, Peter1; Sagade, Satchit1,2; Theissen, Erik3; Weber, Moritz1; Westheide, Christian2,3
Institution: 1: Goethe-Universität Frankfurt; 2: Research Center SAFE; 3: Universität Mannheim
48
We use an extensive panel dataset from the European equity markets to analyze
the market shares of five categories of lit and dark trading mechanisms. We find
that market design features, such as tick size, immediacy and anonymity; market
conditions, such as liquidity and volatility; and the informational environment have
distinct implications for order routing decisions and, in consequence, for the market
shares of the trading venues. Furthermore, these implications markedly differ for
small and large trades, most likely because traders jointly decide on their trade size
and venue choice.
Discussant: Mestel, Roland (Karl-Franzens-Universität Graz)
Let There Be Light? The Impact of MiFID II Imposed Small Dark Trade Bans on Market Quality
Authors: Johann, Thomas1; Sagade, Satchit2,3; Westheide, Christian1,2
Institution: 1: Universität Mannheim; 2: Research Center SAFE; 3: Goethe-Universität Frankfurt
We study the effects of the prohibition of small trades in dark trading venues on
market outcomes, using the double volume cap rules contained in MiFID II. We find
that some of the trading volume lost by dark venues moves to lit continuous
markets. Recently established periodic auction venues are the other important
winners of the new regulation. There are no unconditional improvements of public
market liquidity resulting from the shift in volume. When conditioning our analyses
on firm size, we observe that liquidity improves for large firms, whereas it
deteriorates for smaller ones. There is clear evidence of a decrease in price
efficiency resulting from the ban independent of firm size or the pre-ban share of
dark trading.
Discussant: Gündüz, Yalin (Deutsche Bundesbank)
An Autopsy of a Total Stock Market Failure
Authors: Floros, Ioannis V.3; Florysiak, David1; Johnson, Shane M.2
Institution: 1: University of Southern Denmark; 2: Texas A&M University; 3: Iowa State University
We study a unique case in which a stock market experienced an Akerlof-type failure.
We find that a relatively small fraction of ‘bad’ firms combined with high levels of
49
asymmetric information led to a series of Akerlof-type spillovers onto good firms
evident in increased trading costs and reduced liquidity and volume. As good firms
suffered adverse pricing effects, they exited the market, leading to increases in the
fraction of bad firms and further deterioration in the market. Regulators intervened
attempting to rescue the market, but the problems accelerated; regulators
ultimately shut down the market. Our work sheds light on how stock markets with
low transparency and low listing requirements can fail with even just a small
fraction of bad firms.
Discussant: Breitkopf, Nikolas (Ludwig-Maximilians-Universität München)
Session D5: Corporate Governance
Location: HZ202, Time: Saturday, 09:00 Chair: Erkens, Michael H.R. (Erasmus University Rotterdam)
Managerial Networks and Shareholder Value: Evidence from Sudden Deaths
Authors: Tangaa Nielsen, Kirsten1; von Meyerinck, Felix2
Institution: 1: Copenhagen Business School; 2: Universität St. Gallen
This paper investigates the causal effect of connections among top executives and
directors of different firms on shareholder value using a quasi-natural experiment.
Our identification strategy rests on the idea that sudden deaths trigger unexpected
and exogenous dissolutions of connections, which enables us to isolate the value of
managerial connections by studying stock market reactions at firms where
managers connected to a suddenly deceased manager work. Our results show that
firms connected to a suddenly deceased manager experience a statistically
significant reduction in shareholder value between 1.6 and 2.6 million USD, which
is consistent with the notion that managerial connections foster shareholder value.
When exploring the cross-sectional variation, we find evidence that connections to
inside directors, connections established via previous shared work engagements,
and within-industry connections are most valuable.
Discussant: Menninger, Frederic (Universität Konstanz)
50
Takeover Protection and Firm Value
Authors: Andres, Christian; Jacob, Martin; Ulrich, Lennart
Institution: WHU - Otto Beisheim School of Management
We examine firm value consequences of anti-takeover regulation, exploiting the
staggered announcement and implementation of an anti-takeover regulation in the
U.K. We show that, on average, takeover protection increases firm value. This effect
is partly driven by innovative firms expanding their R&D activities. However, the
anti-takeover regulation also increases the value of less productive firms. We show
that anti-takeover regulation could constrain highly productive firms from taking
over low-productivity firms. Our results imply that, while takeover protection may
stimulate innovation, it can distort the allocation of funds by preventing market
share from moving from less efficient to more efficient firms.
Discussant: von Meyerinck, Felix (Universität St. Gallen)
Corporate Governance and Equity Risk
Authors: Kind, Axel; Menninger, Frederic
Institution: Universität Konstanz
This paper studies the influence of corporate governance on equity risk. By using a
Regression Discontinuity Design applied to shareholder proposals that fail or pass
by a small margin, we obtain causal estimates of the influence of corporate-
governance provisions on three forward-looking measures of equity risk extracted
from option prices: (i) total volatility, (ii) idiosyncratic volatility, and (iii) equity beta.
An improvement of the G-Index by one point increases expected stock-return
volatility by 5%, on average. As equity beta is found to remain unaffected by
changes in corporate governance, the effect is fully attributable to higher
idiosyncratic volatility. The rise in volatility after governance improvements is
particularly large for items included in the E-Index.
Discussant: Erkens, Michael H.R. (Erasmus University Rotterdam)
51
Session D6: Credit Risk
Location: HZ203, Time: Saturday, 09:00 Chair: Wrampelmeyer, Jan (Vrije Universiteit Amsterdam)
Indirect Maturity Transformations
Author: Flore, Raphael
Institution: Universität zu Köln
This paper compares `direct maturity transformations', in which risky long-term
assets are directly financed with short-term debt, with `indirect maturity
transformations', in which such assets are financed with long-term debt that is
financed with short-term debt in a second, separate step. I show that the default
probability of the short-term debt is higher in case of an indirect maturity
transformation than in case of a direct transformation, given the same assets and
the same level of short-term debt. If the purpose of short-term debt is the provision
of `money-like' claims, an indirect maturity transformation can be efficient in spite
of the higher solvency risk, given that long-term debt securities are more liquid than
the underlying assets. But indirect maturity transformations can also emerge due
to regulatory arbitrage, if there is a public insurance of short-term debt and indirect
maturity transformations are not subject to higher capital requirements than direct
transformations.
Discussant: Wimmer, Maximilian (Universität Mannheim)
Credit Risk and Contagion
Authors: Duarte, Diogo1; Rindisbacher, Marcel2; Prieto, Rodolfo2; Saporito, Yuri3
Institution: 1: Florida International University; 2: Boston University; 3: Fundação Getúlio Vargas
We study contagion caused by default in a multi-firm equilibrium setting. Defaults
can occur at predictable stopping times (as in structural models) or as a surprise at
totally inaccessible stopping times (as in reduced-form credit risk models). Both
types of default are modeled to be consistent with the firm's balance sheet and
aggregation over firms. If the number of firms increases, the market prices of risk
converge to a well-defined limit. In contrast to a production economy, in which
quantities of risk are specified exogenously, contagion through the equilibrium
52
pricing kernel cannot be a sizeable component of credit spreads in our exchange
economy if the number of firms is large. This novel contagion result calls into
question some recent claims in the literature that attribute credit spreads mostly
to contagion.
Discussant: Shkel, David (Fernuniversität Hagen)
Funding Supply and Credit Quality
Authors: Rola-Janicka, Magdalena Anna1,3; Perotti, Enrico1,2,3
Institution: 1: University of Amsterdam; 2: Centre for Economic Policy Research; 3: Tinbergen Institute
Some credit booms, though by no means all, result in financial crises. While risk-
taking incentives seem a plausible cause, market participants do not appear to
anticipate increasing risk. We show how credit expansions driven by credit supply
shocks may be misunderstood as productivity driven, due to the opacity of bank
balance sheets. Large funding shocks may induce some intermediaries to scale up
speculative lending, distorting price signals. Other banks and firms may misjudge
actual profitability, reinforcing the credit expansion. Similarly, at times of low saving
supply credit may be inefficiently low, and speculative assets underpriced.
Discussant: Wrampelmeyer, Jan (Vrije Universiteit Amsterdam)
53
Session E1: Empirical Asset Pricing III
Location: HS11, Time: Saturday, 11:00 Chair: Thimme, Julian (Goethe-Universität Frankfurt)
Do Contented Customers Make Shareholders Wealthy? – Implications of Intangibles for Security Pricing
Authors: Zimmermann, Lukas1; Theissen, Erik1,2
Institution: 1: Universität Mannheim; 2: Centre for Financial Research
We explore the relation between an outcome variable of organizational capital,
customer satisfaction, and security returns. Building on recent research showing
that customer satisfaction is related to stock returns, we test whether this relation
is due to a systematic source of risk (as suggested by Eisfeldt and Papanikolaou
(2013)) or to mispricing. Our results describe the relation of customer satisfaction
and organizational capital and indicate that the risk channel of Eisfeldt and
Papanikolaou (2013) is also in place in the case of customer satisfaction. We show
that firms with high levels of customer satisfaction earn excess returns. This result
is robust to a large number of model specifications (including the Fama and French
(2015) 5-factor, the Hou et al. (2015) q-factor and the Stambaugh and Yuan (2017)
mispricing factor model) and test methodologies (matching on firm characteristics
and Fama and MacBeth (1973) regressions) and cannot be explained by relevant
factors.
Discussant: Jacobs, Heiko (Universität Duisburg-Essen)
Quantifying Mispricing
Authors: Jacobs, Heiko1; Müller, Sebastian2
Institution: 1: Universität Duisburg-Essen; 2: German Graduate School of Management and Law
We evaluate the performance of several composite mispricing approaches aiming
at synthesizing the information of the 380 individual cross-sectional anomalies in
our global sample. Relative to the typical anomaly, information aggregation on
average quadruples abnormal return predictability, both in the U.S. and nine large
international stock markets. Mispricing also appears to be pronounced among large
stocks, in the recent past, constructed from published anomalies only, or
54
benchmarked against recently proposed asset pricing models. In sum, our findings
suggest that cross-sectional return predictability is unlikely to be spurious and that
global stock markets might be less efficient than widely thought.
Discussant: Hollstein, Fabian (Leibniz Universität Hannover)
The Contribution of Frictions to Expected Returns
Authors: Hiraki, Kazuhiro1; Skiadopoulos, George1,2
Institution: 1: Queen Mary University of London; 2: University of Piraeus
We derive an option-based formula to estimate the _contribution of market
frictions to expected returns_ (CFER). Our formula makes no assumptions on the
types of frictions nor on investors’ preferences. We document that CFER is sizable,
it predicts stock returns and it subsumes the effect of frictions on expected returns
as expected theoretically. The sizable alpha of a long-short portfolio formed on
CFER is consistent with the size of market frictions and it is not due to model mis-
specification. Moreover, we show that various option-implied measures proxy
CFER, thus providing a theoretical explanation for their ability to predict stock
returns.
Discussant: Thimme, Julian (Goethe-Universität Frankfurt)
Session E2: Behavioral Finance II
Location: HS12, Time: Saturday, 11:00 Chair: Klos, Alexander (Christian-Albrechts-Universität zu Kiel)
Diversification in Lottery-Like Features and Portfolio Pricing Discounts
Author: Liu, Xin
Institution: University of Bath
Why is a portfolio sometimes valued less than the sum of its underlying
components? In this paper, I provide a novel explanation for the question by
utilizing mergers and acquisitions, closed-end funds and conglomerates, where the
value of the aggregate portfolio and the values of the underlying components can
be separately evaluated. I extend the model of Barberis and Huang (2008) and show
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that, a portfolio is traded at a discount when its underlying assets exhibit strong
lottery-like features but a low tendency to produce extreme payoffs at the same
time. I present evidence supporting this model implication and provide a novel and
unifying explanation for the announcement-day returns of mergers and
acquisitions, the closed-end fund discount puzzle, and the conglomerate discount.
Discussant: Klos, Alexander (Christian-Albrechts-Universität zu Kiel)
Endogenous Asymmetric Money Illusion
Authors: Duarte, Diogo1; Saporito, Yuri2
Institution: 1: Florida International University; 2: Fundação Getúlio Vargas
We show that when investors suffer from endogenous asymmetric money illusion,
the usual proportionality between money supply and nominal prices commonly
present in frictionless economies is eliminated, which in turn leads changes in the
money supply to cause real price fluctuations. Nevertheless, its combined effect on
the real state price density and the price of money leads the nominal state price
density, and consequently nominal bond prices, to be independent of money
illusion. This article thus provides a theoretical foundation for the Modigliani-Cohn's
conjecture that money illusion impacts stock markets but not bond markets.
Discussant: Curatola, Giuliano (Goethe-Universität Frankfurt)
Investor Target Prices
Authors: Huang, Shiyang1; Liu, Xin2; Yin, Chengxi3
Institution: 1: University of Hong Kong; 2: University of Bath; 3: Renmin University of China
We argue that investors have a target price as an anchor for the stocks that they
own; once a stock exceeds that target price, investors are satisfied and more likely
to sell the stock. This increased selling can generate a price drift after good news.
Consistent with our argument, using analyst-target-price forecasts as a proxy, we
provide evidence that the fraction of shareholders satisfied generates the post-
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earnings-announcement drift, and stocks with a high fraction of shareholders
satisfied experience stronger selling around announcements. This pattern is
stronger for stocks with low institutional ownership and high uncertainty.
Discussant: Jakobs, Elmar (Karlsruhe Institute of Technology)
Session E3: Banking II
Location: HS13, Time: Saturday, 11:00 Chair: Döttling, Robin (Erasmus University Rotterdam)
Loan officer specialization and credit defaults
Authors: Goedde-Menke, Michael; Ingermann, Peter-Hendrik
Institution: Westfälische Wilhelms-Universität Münster
We show that loan officer specialization has a causal impact on credit defaults of
small- and medium-sized enterprises. Our unique, bank-provided data set enables
us to exploit a wave of early loan officer retirements and the resulting borrower
reallocation as exogenous shock to industry specialization for the remaining loan
officers. In a difference-in-differences analysis excluding all reallocated borrowers,
we find that borrowers who experience a negative shock to loan officer
specialization display a stronger increase in default rates than borrowers in the
control group. We identify a decrease in accuracy of default risk information as
explanation for our finding.
Discussant: Weill, Laurent (University of Strasbourg)
Unsecured and Secured Funding
Authors: Di Filippo, Mario1; Ranaldo, Angelo2; Wrampelmeyer, Jan3,4
Institution: 1: World Bank; 2: Universität St. Gallen; 3: Vrije Universiteit Amsterdam; 4: Tinbergen Institute
We empirically investigate why funding liquidity is fragile. We test predictions from
the main theories on funding fragility by providing the first study of how individual
banks borrow and lend in the euro unsecured and secured interbank market.
Consistent with theories in which lenders enforce market discipline by monitoring
counterparty credit risk and theories highlighting that secured loans are less
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informational sensitive, we find that banks with low credit worthiness replace
unsecured borrowing with secured loans. Moreover, riskier lenders provide more
secured loans to replace unsecured lending, which is not consistent with
speculative or precautionary liquidity hoarding theories. Instead, lenders are
precautionary in the sense that they prefer to lend against safe collateral.
Discussant: Döttling, Robin (Erasmus University Rotterdam)
Does bank efficiency influence the cost of credit?
Authors: Shamshur, Anastasiya2; Weill, Laurent1
Institution: 1: University of Strasbourg; 2: Norwich Business School
Using a large sample of firms from nine European countries, this study examines
the relationship between bank efficiency and the cost of credit for borrowing firms.
We hypothesize that bank efficiency – the ability of banks to operate at lower costs
– is associated with lower loan rates and thus lower cost of credit. Combining firm-
level and bank-level data, we find support for this prediction. The effect of bank
efficiency on the cost of credit varies with firm and bank size. Bank efficiency
reduces cost of credit for SMEs, but does not exert a significant influence for micro
companies and large firms. Furthermore, the effect is driven by large banks. We also
find out that lower bank competition amplifies the transmission of greater bank
efficiency to cost of credit. Overall, our results indicate that measures that increase
bank efficiency can foster access to credit.
Discussant: Goedde-Menke, Michael (Westfälische Wilhelms-Universität Münster)
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Session E4: Law, Crime and Finance
Location: HZ201, Time: Saturday, 11:00 Chair: Hanspal, Tobin (Research Center SAFE, Goethe-Universität Frankfurt)
Experience is the Best Teacher: Financial Misconduct and White-Collar Crime
Authors: Andersen, Steffen1,4; Hanspal, Tobin2,5; Nielsen, Kasper Meisner3
Institution: 1: Copenhagen Business School; 2: Goethe-Universität Frankfurt; 3: Hong Kong University of Science and Technology; 4: CEPR; 5: Research Center SAFE
This study investigates the determinants of white-collar crime and it’s increased
prevalence in the aftermath of the global financial crisis. We hypothesize that
experiences with financial misconduct affect the perceived costs and returns to
individuals’ own future criminal activity. Our results show that the experience of
losing investments from retail banks prosecuted for financial misconduct increases
the subsequent probability of being convicted of a white-collar crime. Our findings
uncover strong effects at the extensive margin: the increase in white-collar crime is
caused almost exclusively by investors who had no prior history of criminal activity.
These experiences have no effect on other criminal felonies - such as property theft
or violent crime.
Discussant: Kind, Axel (Universität Konstanz)
Fraud in Open-End Mutual Funds
Authors: Atanasov, Vladimir2; Merrick, John J. 2; Schuster, Philipp2
Institution: 1: Karlsruhe Institute of Technology; 2: Raymond A. Mason School of Business
We study potential fraudulent net asset value (NAV) and return inflation in mutual
funds that invest in structured products. We design a filter to identify funds that
likely mismark odd lot and two classes of round lot structured products. Applied to
a sample of 142 funds launched after January 2010, our filter identifies 12 highly
questionable funds managing $75 billion. The performance of these funds matches
closely the predicted pattern of mismarking: extremely high alpha and skewness,
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particularly immediately after launch. We show that structured-product mis-
marking can seriously inflate return-since-inception metrics and cause significant
losses to later investor cohorts.
Discussant: Hanspal, Tobin (Research Center SAFE, Goethe-Universität Frankfurt)
Session E5: Cryptocurrencies and FinTechs
Location: HZ202, Time: Saturday, 11:00 Chair: Reynolds, Julia Elizabeth (Università della Svizzera Italiana)
A High-Frequency Analysis of Bitcoin Liquidity
Authors: Brauneis, Alexander1; Mestel, Roland2; Riordan, Ryan3; Theissen, Erik4
Institution: 1: Universität Klagenfurt; 2: Karl-Franzens-Universität Graz; 3: Queens University; 4: Universität Mannheim
We study Bitcoin (BTC) exchanges on three continents, Bitnex, Bitstamp and GDAX.
We use a high frequency dataset that contains both transactions data and
snapshots of the BTC to US dollar (BTCUSD) order book. The BTCUSD market is
highly liquid in terms of bid-ask spreads and order book depth. While spreads are
low, we find large differences between the three exchanges in terms of transaction
and posted prices. The price differences fall over our sample period meaning that
markets are becoming more integrated. We show that exchanges play an
increasingly important role in the transfer of BTC. At the end of 2017, exchanges
processed roughly 30% of BTC transfers at the end of our sample period this
increases to 90%.
Discussant: Rehse, Dominik (Zentrum für Europäische Wirtschaftsforschung)
On the Rise of FinTechs – Credit Scoring using Digital Footprints
Authors: Berg, Tobias1; Burg, Valentin2; Gombović, Ana1; Puri, Manju3
Institution: 1: Frankfurt School of Finance & Management; 2: Humboldt-Universität zu Berlin; 3: Duke University, FDIC, and NBER
We analyze the information content of the digital footprint – information that
people leave online simply by accessing or registering on a website – for predicting
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consumer default. Using more than 250,000 observations, we show that even
simple, easily accessible variables from the digital footprint equal or exceed the
information content of credit bureau scores. Furthermore, the discriminatory
power for unscorable customers is very similar to that of scorable customers. Our
results have potentially wide implications for financial intermediaries’ business
models, for access to credit for the unbanked, and for the behavior of consumers,
firms, and regulators in the digital sphere.
Discussant: Keil, Jan (University of the West Indies)
Deviations from Triangular Arbitrage Parity in Foreign Exchange and Bitcoin Markets
Authors: Reynolds, Julia Elizabeth1; Soegner, Leopold2,3,4; Wagner, Martin2,5,6; Wied, Dominik7
Institution: 1: Università della Svizzera Italiana; 2: Institute for Advanced Studies; 3: Vienna Graduate School of Finance; 4: NYU Abu Dhabi; 5: Bank of Slovenia; 6: Technische Universität Dortmund; 7: Universität zu Köln
This paper applies new econometric tools to monitor and detect so-called "financial
market dislocations," defined as periods in which substantial deviations from
arbitrage parities take place. In particular, we focus on deviations from the
triangular arbitrage parity for exchange rate triplets. Due to increasing media
attention towards mispricing in the market for cryptocurrencies, we include the
cryptocurrency Bitcoin in addition to fiat currencies. We do not find evidence for
substantial deviations from the triangular arbitrage parity when only traditional fiat
currencies are concerned, but document significant deviations from triangular
arbitrage parities in the newer markets for Bitcoin. We confirm the implications of
our results for portfolio strategies by showing that a currency portfolio that trades
based on our detected break-points outperforms a simple buy-and-hold strategy.
Discussant: Johann, Thomas (Universität Mannheim)
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Session E6: Financial Econometrics
Location: HZ203, Time: Saturday, 11:00 Chair: Sagade, Satchit (Research Center SAFE & Goethe-Universität Frankfurt)
Body and Tail. Separating the distribution function by an efficient tail-detecting procedure in risk management
Authors: Börner, Christoph J.; Hoffmann, Ingo
Institution: Heinrich-Heine-Universität Düsseldorf
In risk management, tail risks are of crucial importance. The quality of a tail model,
which is determined by data from an unknown distribution, depends critically on
the subset of data used to model the tail. Based on a suitably weighted mean square
error, we present a method that can separate the required subset. The selected
data are used to determine the parameters of the tail model. Notably, no parameter
specifications have to be made to apply the proposed procedure. Standard
goodness of fit tests allow us to evaluate the quality of the fitted tail model. We
apply the method to standard distributions that are usually considered in the
finance and insurance industries. In addition, for the MSCI World Index, we use
historical data to identify the tail model and to compute the quantiles required for
a risk assessment.
Discussant: Ulrich, Lennart (WHU - Otto Beisheim School of Management)
Correcting Alpha Misattribution in Portfolio Sorts
Authors: Hoechle, Daniel1,2; Schmid, Markus3; Zimmermann, Heinz1
Institution: 1: Universität Basel; 2: FHNW School of Business; 3: Universität St. Gallen
We show that portfolio sorts, as commonly employed in empirical asset pricing
applications, are at risk of accidentally misattributing parts of the risk-adjusted
return (or "alpha") to the firm characteristic underlying the sort. Such misattribu-
tion occurs if the firm characteristic is correlated with an unobservable yet time-
persistent factor. We propose a novel, regression-based methodology for ana-
lyzing asset returns. Our technique can reproduce the alpha and factor exposure
estimates from all variants of sorting assets into (e.g., decile) portfolios. In addi-
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tion, and contrary to standard portfolio sorts, our approach handles multivariate
and continuous firm characteristics and, if firm-specific (fixed) effects are in-cluded
in the analysis, is robust to alpha misattribution. In our empirical analy-sis, we
indeed find alpha misattribution to be an issue in conventional portfolio sorts as
several well-known characteristics-based factors lose their predictive power when
we account for firm fixed effects.
Discussant: Azevedo, Vitor (Technische Universität München)
Uncovering the time-varying causality between volatility and commonality in liquidity
Authors: Koser, Christoph; Chulia, Helena; Uribe, Jorge Mario
Institution: Universitat de Barcelona
This study examines the dynamic linkages between commonality in liquidity in
international stock markets and market volatility. Using a recently proposed
liquidity measure as input for a variance decomposition exercise, we document that
innovations to liquidity in most markets are induced predominately by inter-market
innovations. We also find that commonality in liquidity peaks right after large
negative market declines, coinciding with crisis periods. The results from a dynamic
granger causality test indicate that the relationship between commonality in
liquidity and market volatility is bi-directional and time-varying. We show that while
volatility granger-causes commonality in liquidity during the entire sample period,
market volatility is enhanced by commonality in liquidity only in sub-periods.
Discussant: Sagade, Satchit (Research Center SAFE & Goethe-Universität Frankfurt)
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DGF 2018 Reviewers
Adam, Tim
Ahnert, Toni
Aktas, Nihat
Aretz, Kevin
Aussenegg, Wolfgang
Bannier, Christina
Barth, Andreas
Baule, Rainer
Behr, Patrick
Berg, Tobias
Berndt, Antje
Bertsch, Christoph
Betzer, André
Bienz, Carsten
Boehmer, Ekkehart
Branger, Nicole
Breuer, Wolfgang
Burghof, Hans-Peter
Chen, An
Colonnello, Stefano
Dangl, Thomas
Derrien, Francois
Düllmann, Klaus
Elendner, Hermann
Entrop, Oliver
Erkens, Michael
Fecht, Falko
Fischer, Marcel
Flor, Christian Riis
Florysiak, David
Franke, Günter
Friewald, Nils
Füss, Roland
Gehde-Trapp, Monika
Gehrig, Thomas
Gider, Jasmin
Glaser, Markus
Goedde-Menke, Michael
Gomber, Peter
Grammig, Joachim
Grundke, Peter
Guettler, Andre
Gündüz, Yalin
Hackethal, Andreas
Hakenes, Hendrik
Hillert, Alexander
Hirth, Stefan
Homölle, Susanne
Huggenberger, Markus
Isaenko, Sergey
Jackwerth, Jens
Jankowitsch, Rainer
Jung, Robert
Kasch, Maria
Keiber, Karl Ludwig
Kempf, Alexander
Kick, Thomas
Kiesel, Rüdiger
Kind, Axel
Kisser, Michael
Klos, Alexander
Koetter, Michael
Konermann, Patrick
Koziol, Christian
Kraft, Holger
Krahnen, Jan Pieter
Kürsten, Wolfgang
Langer, Thomas
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DGF 2018 Reviewers (cont.)
Laux, Christian
Lawrenz, Jochen
Limbach, Peter
Löffler, Gunter
Loos, Benjamin
Mahayni, Antje
Maug, Ernst
Meinerding, Christoph
Memmel, Christoph
Menkhoff, Lukas
Merkle, Christoph
Meyer, Steffen
Muck, Matthias
Neyer, Ulrike
Niessen-Rünzi, Alexandra
Nitschka, Thomas
Nolte, Ingmar
Nolte, Sandra
Norden, Lars
Noth, Felix
Park, Andreas
Perras, Patrizia
Pfingsten, Andreas
Poulsen, Rolf
Prokopczuk, Marcel
Pütz, Alexander
Randl, Otto
Rieger, Marc Oliver
Rocholl, Jörg
Röder, Klaus
Roesch, Daniel
Ruckes, Martin
Ruenzi, Stefan
Schäfer, Klaus
Schäfer, Larissa
Schaub, Nic
Schempp, Paul
Schenk-Hoppé, Klaus
Schlag, Christian
Schliephake, Eva
Schlütter, Sebastian
Schmid, Markus
Schneemeier, Jan
Schneider, Christoph
Scholz, Hendrik
Schüwer, Ulrich
Siegel, Stephan
Stadje, Mitja
Steffen, Sascha
Stomper, Alex
Stotz, Olaf
Strobl, Günter
Theissen, Erik
Tonzer, Lena
Tykvova, Tereza
Uhrig-Homburg, Marliese
Ulrich, Maxim
von Lilienfeld-Toal, Ulf
Wagner, Hannes
Wallmeier, Martin
Weigert, Florian
Westheide, Christian
Wilkens, Marco
Zeisberger, Stefan
Zeng, Jing
Titel Untertitel
Conference outline
The conference aims to bring together researchers and practitioners in order to discuss the latest theoretical and empirical results from all areas of finance, banking and insurance. A special section will be devoted to topics from Energy Finance. The keynote speech of the conference will be delivered by Bob Litterman, Kepos Capital.
Call-for-Papers
26th Annual Meeting of the German Finance Association
September 27-28, 2019, University Duisburg-Essen, Campus Essen, Germany
Conference topics
We cordially invite researchers and practitioners to participate in the 26th Annual Meeting of the German Finance Association (DGF) to be held at University Duisburg-Essen (Campus Essen) on 27th and 28th September 2019. A doctoral workshop will take place on 26th September.
Conference submission
Submissions of papers for the conference will be possible from 4th February 2019 to 26th April (midnight CET).
Additional information will soon be available on www.dgf2019.wiwi.uni-due.de.
We look forward to meeting you for an exciting conference in Essen, the Energy Capital of Germany.
Call for Papers
18th Cologne Colloquium on Financial Markets
Asset Management
April 1st, 2019, Cologne
Cfr / University of Cologne Albertus-Magnus-Platz
50923 Cologne Germany
Tel. +49 (0)221-470-6995 Fax +49 (0)221-470-3992
Centre for Financial Research Cologne
Topic: The colloquium provides a unique platform to discuss the latest is-sues in asset management. We particularly encourage submissions of pa-pers on all areas of asset management, such as mutual and hedge funds, pension funds and ETFs, trading strategies, and investor behavior. How-ever, there is no restriction on these topics.
Concept: The 18th Cologne Colloquium on Financial Markets addresses both academics and practitioners interested in the field of asset management. There will be presentations and a separate poster session. To provide a workshop atmosphere, the number of participants is limited. We expect participants to be willing to discuss another paper. The conference language is English. Submission: Please submit your paper as pdf file via email to colloquium@cfr-cologne.de. The cover page of your submission should in-clude the title, the names of the authors, their addresses, phone numbers, and email addresses. The following page should contain the title and an ab-stract, leaving no hint on the authors’ identities. Schedule: The deadline for submissions is January 15th, 2019. The papers will be double-blind reviewed by a distinguished referee panel. Authors will be notified about the outcome by end of February 2019. Registration: The conference fee is € 75. Conference fees will be waived for all presenting authors and discussants. If you are interested in attending, please send an email to colloquium@cfr-cologne.de. Information: For further information, please visit our website www.cfr-cologne.de or contact Dr. Alexander Pütz (puetz@cfr-cologne.de).
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