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
Winter Term 2019/20
September 20th, 2019, 12:00-13:00, D4.0.133
Veronesi Pietro (Chicago Booth)
Abstract: Differential variation in households’ risk preferences over the business cycle affects the demand and supply of debt securities, which, in turn, affect intermediaries’ balance sheets. As in the data, our frictionless model predicts that intermediaries’ debt declines in contractions when their financial risk increases and asset prices drop, thus mimicking active deleveraging. As intermediaries’ leverage proxies for aggregate risk aversion, it predicts asset returns. Our model is consistent with poorer households borrowing more and with levered households deleveraging in crisis and "fire selling" their risky securities. Yet, as empirically observed, their debt-to-wealth ratios increase as higher discount rates make their wealth decline faster.
September 25th, 2019, 12:00-13:00, D4.0.019
Lu Li, (LMU Munich)
Title: Opening up the Black Box: the Impact of Technological Transparency on Self-Protection
Abstract: This article discusses the behavioral and welfare implications of uncovering the mechanism of self-protection technologies. Based on a new interpretation of self-protection, we introduce the concept of technological transparency -- the extent to which the mechanism of the technology is understood. We analyze the consequence of improved technological transparency according to whether the improvement stems from uncovering exogenous or endogenous risk determinants. We show that technological transparency improves welfare through enabling more efficient prevention, but this welfare improvement may be undermined or even reversed if information is incompletely disclosed or if the risk can be insured through private insurance markets. We also show that technological transparency affects behavior through an ex ante information channel and an ex post regret channel. Our findings have implications on the cost-benefit analysis of scientific research conducted to identify hidden risk determinants. They also inform the design of personalized preventive healthcare, as well as information campaigns to promote public safety.
December 16th, 2019, 12:00-13:00, D4.4.008
Thomas Rauter (The University of Chicago Booth School of Business)
Title: Perceived Precautionary Savings Motives: Evidence from FinTech
Summer Term 2019
Abstract: We extend an investment model of Bruss and Ferguson (2002) type, where an investor observes a sequence of T investment alternatives, each endowed with a random quality characteristic. The information available at any period is the current and all prior quality characteristics and the investor has to decide whether to invest in the same period the project shows up. Finally, after the last investment alternative has shown up, those n projects with highest realized quality characteristics generate positive gross-returns which depend on their relative ranking, while the payo s of all other projects are zero. Under these assumptions we obtain the value functions and optimal investment rules for risk-neutral or risk-averse investors. A simulation study demonstrates how optimal investment decisions are a ected by the time horizon and by the attitudes towards risk. In addition, we provide sucient conditions under that the value function is non-increasing in the number of periods T.
May 13th, 2019, 12:00-13:00, D4.0.019
Steven Baker (McIntire School of Commerce, University of Virginia)
Title: "Asset Prices and Portfolios with Externalities"
Abstract: Elementary portfolio theory implies that environmentalists optimally hold more shares of polluting firms than non-environmentalists, and that polluting firms attract more investment than otherwise identical non-polluting firms. These results reflect the demand to hedge against high pollution states. Pigouvian taxation can reverse the aggregate investment results, but environmentalists still overweight polluters. We introduce countervailing motives for environmentalists to underweight polluters, com- paring the implications when environmentalists coordinate to internalize pollution, or have nonpecuniary disutility from holding polluter stock. With nonpecuniary disutil- ity, introducing a green derivative product may dramatically alter who invests most in polluters, but has no impact on aggregate pollution.
May 15th, 2019, 12:00-13:00, D4.0.039
Title: "Discretionary NAVs"
Abstract: A relatively recent trend is participation by leading mutual funds and fund families in the private equity market, which has opened the door of this segment of the economy to a broader set of investor participants. Funds have substantial discretion over the pricing of these investments and, in turn, net asset values. We examine strategic pricing behavior in a sample of 152 mutual funds with positions in 314 private firms. We find heterogeneity in fund family discretionary pricing decisions. Some funds are frequent revaluers while others are infrequent. Some funds are leaders, while others are followers. We find that private equity pricing is procyclical with respect to relative fund performance, which is consistent with the theoretical model. We also examine fund flows and observe that investors respond positively to reported private firm performance and appear to rationally anticipate predictable changes in private equity valuations.
June 4th, 2019, 12:00-13:00, D4.4.008
Giuseppe Pratobevera (USI-University Lugano)
Title: "The Role of Underwriter-Affiliated Institutional Investors in the IPO Aftermarket"
June 11th, 2019, 12:00-13:00, D4.4.008
Jack Stecher (Alberta School of Business)
Title:"Coherent Classification and Signaling"
Abstract: We investigate whether classifying line items as core earnings or as special items can signal their persistence. Although persistence is soft information, classifications inform investors, because it may be possible to confirm the ranking of items by persistence. If a firm respects persistence ranking in its classifications, we call the classifications coherent. We show that requiring coherence explains important empirical regularities: firms disproportionately classify losses as special items, and investors respond more to negative than to positive special items. Nevertheless, the classifications reveal as much information as possible. This suggests the harm to investors of classification shifting may be overstated.
June 19th, 2019, 12:00-13:30, D4.0.144
Mrinal Mishra (University of Zurich)
Title: "The effect of conflict on lending: Empirical evidence from Indian border areas"
Abstract: We study the effect of conflict on loan officers in areas bordering India and Pakistan in the state of Jammu & Kashmir in India. We observe that the loan terms borrowers obtain in equilibrium get progressively worse after repeated incidences of conflict. This may be attributed to changes in beliefs or changes in risk aversion on behalf of the branch administration. Our tests demonstrate that both factors, changing risk preferences and beliefs contribute to the final outcome. The latter primarily manifests itself through changes in expected future default due to learning about the environment. Our results are expected to inform policymakers how lending may evolve when faced with shocks emanating from political and economic turmoil.
July 3rd, 2019, 10:00-11:00, D4.0.019
Sanjai Bhagat(University of Colorado)
Abstract: Director stock ownership is most consistently and positively related to future corporate performance. Public policymakers and long-term investors should find this result especially relevant given their strong interest in long-term corporate performance. Equally important, corporate governance researchers should consider director stock ownership as a measure of corporate governance; this will also aid in the comparability of results across different studies.
In our 2008 paper, Corporate governance and firm performance, we considered data through 2002. In this paper, we extend our sample period through 2016. These additional 14 years of data provide a powerful out-of-sample test of the specification and power of director stock ownership as a measure of corporate governance. Further, extending the period allows us to capture the dynamics of the financial crisis, the Great Recession, Sarbanes-Oxley (2002), and Dodd-Frank (2010). We find director stock ownership most consistently and positively related to future corporate performance in this out-of-sample period (2003-2016) across a battery of different specifications, estimation techniques, and for different sub-samples. One particular sub-sample of considerable public interest is the 100 largest U.S. financial institutions around 2008. Bank director stock ownership is positively related to future bank performance, and bank director stock ownership is negatively related to future bank risk, both prior to and during the financial crisis – both results of considerable interest to senior bank regulators.