Finance Brown Bag Seminar
The Finance Brown Bag Seminar is held jointly with the Vienna Graduate School of Finance (VGSF) and serves as a presentation platform for PhD students, faculty members, and visitors. It usually takes place on Wednesdays from 12:00 to 13:00 (location tba). For further information, please contact email@example.com
Summer term 2017
June 21st, 2017, 11:00-12:30, D4.0.022
Julian Kolm (WU)
Titel: "Staggered Debt, Banks' Liquidity, and its Regulation"
Abstract: This paper explores the impact of staggered versus concentrated debt structures on banks' ability to survive unexpected cash flow shocks. I show that in order to survive negative cash flow shocks, banks with staggered debt need to store more cash than banks with concentrated debt. Liquidity requirements that resemble the Basel III Liquidity Coverage Ratio provide incentives for banks to stagger their debt, because this allows banks to reduce the amount of cash they need to hold. Liquidity requirements should account for banks' incentives to stagger their debt in order to ensure that banks can survive cash flow shocks. Such liquidity requirements reduce the market value of banks' assets and their ability to provide financial intermediation.
May 30th, 2017, 12:00-13:00, TC.5.04
Yuri Tserlukevich (Arizona State University)
Titel: "Embracing Risk: Hedging Policy for Firms with Real Options" (with Ilona Babenko)
Abstract - This study analyzes the dynamic risk management policy of a firm that faces a tradeoff between minimizing the costs of financial distress and maximizing financing for investment. Costly external financing of investment discourages hedging because of the option to abandon investment at low profitability and the option to expand investment at high profitability. Our theory generates results consistent with actual policies, without relying on the costs of risk management. First, we show that firms with safe assets and fewer growth options can choose to hedge more aggressively than firms with risky assets. Second, firms prefer to hedge systematic rather than firm-specific risk, even when hedging technologies for both types of risk are available. Third, risk is optimal at lower net worth. Therefore, more constrained firms may appear to hedge less aggressively.
May 29th, 2017, 12:00-13:00, D4.0.039
Nathan Foley-Fisher (Board of Governors of the Federal Reserve System)
"Over-the-Counter Market Liquidity and Securities Lending" (joint with Stefan Gissler and Stéphane Verani)
Abstract: This paper studies how over-the-counter (OTC) market liquidity was adversely affected by the collapse of securities lending during the 2007-2008 financial crisis. We combine micro-data on corporate bond OTC market trades with securities lending transactions, in which insurance companies are major counterparties. We exploit cross-sectional differences in the corporate bonds held and lent by insurance companies to estimate the causal effect of securities lending on corporate bond market liquidity. We show that the run on insurers’ securities lending programs in 2008 caused a long-lasting reduction in corporate bond market liquidity, even after controlling for the interaction between funding liquidity and market liquidity.
May 10th, 2017, 13:00-14:00, D4.4.008
Toni Whited (University of Michigan's Ross School of Business)
Title: The Interest Sensitivity of Corporate Cash (with Xiaodan Gao and Na Zhang)
Abstract: We document a hump-shaped relationship between interest rates and corporate cash demand that contradicts conventional wisdom, and we develop a theoretical framework to rationalize this finding. The model features external financing costs that are endogenously determined by interest rates. Interest rates affect corporate cash demand through two channels. First, forgone interest earnings imply an intuitive negative relation. Second, saved external borrowing costs imply a positive relation. The calibrated model quantitatively matches data features and reproduces the hump-shaped cash-interest relationship. This non-monotonic corporate money demand schedule has important implications for monetary policy.
May 2nd, 2107, 12:00-13:00, D4.0.008
Leopold Sögner (Institute for Advanced Studies, IHS)
"Making Parametric Portfolio Policies Work" (joint with Thomas Gehrig and Arne Westerkamp)
April 24th, 2017, 11:00-12:00, D4.0.039
Lubos Pastor (Chicago Booth School of Business)
"Political Cycles and Stock Returns" (joint with Pietro Veronesi)
Abstract: We develop a model of political cycles driven by time-varying risk aversion. Heterogeneous agents make two choices: whether to work in the public or private sector and which of two political parties to vote for. The model implies that when risk aversion is high, agents are more likely to elect the party promising more fiscal redistribution. The model predicts higher average stock market returns under Democratic than Republican presidencies, explaining the well-known “presidential puzzle”. Under sufficient complementarity between the public and private sectors, the model also predicts faster economic growth under Democratic presidencies, which is observed in the data.
April 13th, 2017, 11:45-13:30,D4.0.039
Amir Rubin (Beedie School of Business)
"Lured by the Consensus: Pricing Implications of Treating All Analysts as Equal" (joint with Roni Michaely, Dan Segal and Alexander Vedrashko).
Abstract: We suggest a more accurate earnings forecast than the consensus by classifying analysts into high and low quality (HQ and LQ) categories based on their past forecast accuracy. We find that the market overweighs the information content of the consensus forecast and does not utilize price-relevant information in the forecasts and recommendations of the HQ analysts. The HQ analysts’ recommendation changes and forecast dispersion predict the firm’s stock returns and return volatility next month. Importantly, the PEAD phenomenon is present only when the HQ analysts are relatively uncertain. At the aggregate level, recommendation changes of the HQ analysts predict future industry and market returns, while the consensus recommendation changes do not, and market volatility is higher following periods of greater uncertainty among the HQ analysts. Overall, our results indicate that fixation on the consensus can lead to less accurate forecasts and inefficient prices.
April 5th, 2017, 12:00-13:00 D3.0.221
Katarina Lucivjanska (Pavol Jozef Safarik University)
"Optimal Granularity for Portfolio Choice" (joint with Nicole Branger and Alex Weissensteiner)
Abstract: Many optimization-based portfolio rules fail to beat the simple 1/N rule out-of-sample because of parameter uncertainty. In this paper we suggest a grouping strategy in which we first form groups of equally weighted stocks and then optimize over the resulting groups only. In a simplied setting we show analytically how to optimize the trade-o between drawbacks from parameter uncertainty and drawbacks from deviating from the overall optimal asset allocation. We illustrate that the optimal group size depends on the volatility of the assets, on the number of observations and on how much the optimal asset allocation divers from 1/N. Out of sample back-tests confirm the validity of our grouping strategy empirically.
March 30th, 2017, 13:00-14:00, D4.0.019
Doron Avramov (The Jerusalem School f Business Administration)
"Bonds, Stocks, and Sources of Mispricing”
Abstract: This paper shows that investor sentiment and financial distress jointly drive bond and equity overpricing underlying market anomalies. In particular, the intersection of high sentiment and rating downgrades of distressed firms characterizes episodes of inflated bond and stock prices to the extent that assets are correctly priced beyond such episodes. Overpricing among bonds and stocks emerges when sentiment-driven investors consistently underestimate the implications of financial distress for high credit risk firms.
March 6th, 2017, 12:00-13:00, D4.0.039
Thomas Rauter (WU)
"Real Effects of Mandatory Disclosure"