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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

12

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

16

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

18

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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