A Gravity Equation for Bank Loans

Bettina Brüggemann, Universität Frankfurt; Jörn Kleinert, Institut für Volkswirtschaftslehre, Universität Graz; Esteban Prieto, Universität Tübingen

We present a gravity equation for bank loans derived from a firm's search for the "ideal" loan offered by a bank. A typical loan offer has various dimensions (maturity, amount, timing, collateral, disclosure requirements) which involve costs that go beyond the mere interest rate. Taking into account all the costs, a firm chooses the cost minimizing bank loan. Based on this decision criterion, we derive the probability of a firm from country i to choose the desired loan contract from a bank in country j. We then use this probability to derive the total volume of bank loans issued in country j and given to firms in country i. The resulting equation is a gravity equation for cross-border bank loans. Based on the theoretical model, we estimate the gravity equation using different methods while controlling for the unobserved heterogeneity proposed by our theoretical model.

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Banning Margin Trading Institutions in Experimental Asset Markets

Sascha Füllbrunn, Max Planck-Institut Jena; Tibor Neugebauer, Luxembourg School of Finance

Leverage exacerbates speculative price bubbles. We test this conjecture by analyzing the impact of margin trading on experimental asset markets. Financial decision makers leverage their trades using a margin account. Violating margin requirements triggers a margin call and open positions are automatically covered until requirements are met. We compare institutions in that we systematically ban margin purchases and/or short sales in a 2x2 design. Our results suggest smaller overpricing of fundamental values when margin purchases are banned and higher overpricing when short sales are banned.

Financial Flexibility – Corporate Investment and Financing Decisions when Capital Markets are not frictionless

Thomas Köppel, Universität Graz

The balance sheet channel of monetary transmission has effects on stock returns. An alteration in the monetary policy has cross-sectionally different effects on small and large firms. Small firms, typically those that rely on posting collateral to keep borrowing costs low, are affected two-fold: their collateral values are affected as well as their cash flows. Both effects change their debt capacity, which in turn makes them vulnerable to accerlator-style, procyclical movements of their investments. Due to that risk being systemic, in the way that it cannot be fully diversified away by investors, a risk premium is hypothesized to be demanded by stock investors. Contrary to this, large firms' debt capacity is unaffected by collateral and cash flow effects. Thus large firms are not exposed to the systemic risk of being financially constrained. An empirical study was conducted showing that firms, which were a priori classified as being financially constrained, indeed exhibit a higher stock return, when compared to unconstrained firms. This opens up another way in which monetary policy affects the economy. The study further contains evidence in favor of a progressing financial market integration within the Eurozone.

Two heads are less bubbly than one: team decision-making in an experimental asset market

Stefan Palan, Universität Graz

In the world of mutual funds management, responsibility for investment decisions is increasingly entrusted to small teams instead of individuals. Yet the effect of team decision-making in a market environment has never been studied in a controlled experiment. In this paper, we investigate the effect of team decision-making in an asset market experiment that has long been known to reliably generate price bubbles and crashes in markets populated by individuals. We find that this tendency is substantially reduced when each decision-making unit is instead a team of two. This holds across a broad spectrum of measures of the severity of mispricing, both under a continuous double-auction institution and in a call market. The result is not driven by reduced turnover due to time required for deliberation by teams, and continues to hold even when subjects are experienced. Our result also holds not only when our teams treatments are compared to the ‘narrow’ baseline provided by the corresponding individuals treatments, but also when compared more broadly to the results of the large body of previous research on markets of this kind.

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Systematic Risk and Credit Ratings of Bonds and Mortgage Securitizations

Daniel Rösch, Institute of Banking & Finance, Leibniz University of Hannover; Harald Scheule, School of Finance, University of Technology, Sydney

Investors were surprised during the Global Financial Crisis that mortgage securitizations implied larger default rates than corporate bonds given the same credit rating.

This paper provides theoretical and empirical evidence that mortgage securitizations imply a larger degree of systematic risk than bonds. In addition, the paper shows that credit ratings do not reect the systematic risk appropriately.

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Vergleichende Analyse von Fondsdirektinvestments mit Fondsgebundenen Lebensversicherungen

Andrea Gauper, Universität Graz

Mit dem Budgetbegleitgesetz 2011 wurde die Systematik der Besteuerung von Kapitalvermögen inklusive Substanzgewinnen in Österreich gänzlich neu geregelt. Dies betrifft auch die steuerliche Behandlung von Investmentfonds, während Versicherungsverträge von der Vermögenszuwachsbesteuerung generell ausgenommen bleiben, da diese bestimmte Risiken abdecken und daher keine Einkunftsquelle darstellen. Gerade fondsgebundene Lebensversicherungen können durch diese steuerliche Besserstellung für langfristig orientierte Investoren eine interessante Alternative zu einer Direktveranlagung in Fondsanteilscheine darstellen. Die vorliegende Studie vergleicht daher Fondsdirektinvestments mit Investments in fondsgebundene Lebensversicherungen im Lichte der neuen steuerlichen Rahmenbedingungen und zeichnet ein nuanciertes Bild der Vor- und Nachteile verschiedener Veranlagungsstrategien.

Reaktionen auf Gewinnüberraschungen am deutschen Aktienmarkt

Siegfried Klopf, Universität Graz

Zahlreiche Studien im anglo-amerikanischen Raum dokumentieren ein systematisches Verhalten von Aktienkursen nach Gewinnankündigungen von Unternehmen. Dieses als Post-Earnings-Announcement Drift (PEAD) bekannte Phänomen ermöglicht die Vorhersehbarkeit von abnormal returns als Folge der verzögerten Anpassung der aktuellen Preise an ihre neuen fundamentalen Werte. Die Existenz des PEAD wurde auch schon in Europa (wie z.B. in Spanien, Finnland oder Großbritannien) öfters nachgewiesen, für den deutschsprachigen Raum gibt es darüber aber bisher wenig umfangreiche Untersuchungen.

Dieses Paper prüft die kurzfristigen Reaktionen des deutschen Aktienmarktes auf die Ankündigung von Quartalsgewinnen. Zusätzlich werden die vergangene risiko-adjustierte Performance (RAPM) bzw. das abnormale Handelsvolumen einer Aktie rund um den Ankündigungstag in die Analyse mit einbezogen. Es zeigen sich extrem hohe kumulierte durchschnittliche abnormale Renditen (CAAR) für Unternehmen mit unerwartet positiven Gewinnen und einem hohen abnormalen Handelsvolumen am Ankündigungstag. Genauso sind signifikant hohe CAAR für das Teilportfolio von Aktien mit positiven Gewinnüberraschungen und einer negativen vergangenen RAPM zu erkennen, und zwar über alle Unternehmensgrößen.

Die Robustheit des Modells wird unter anderem mittels Anwendung unterschiedlicher Rendite-generierender Prozesse getestet: hier werden neben dem standardmäßigen Markt-Modell auch ein einfaches Constant Mean Return Modell sowie ein um einen AR(1)-Term erweitertes Markt-Modell mit der Annahme einer im Zeitablauf fluktuierenden Varianz des Störterms, die über ein GARCH(1,1)-Modell abgebildet wird, eingesetzt.

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Markowitz versus Regime Switching: An Empirical Approach

Immanuel Seidl, Universität Graz

This article discusses an adjusted regime switching model in the context of portfolio optimization and compares the attained portfolio weights and the performance to a classical mean-variance set-up as introduced by Markowitz (1952). The model postulates different asset price dynamics under different regimes, and jumps between regimes are driven by a Markov process. For examples, 'bear' and 'bull' markets could be such regimes. Given a particular regime, portfolio weights are set based on the conditional means and variance-covariance structure of the asset dynamics. We evaluate the model in an out-of-sample period of the last three years with a moving window and a forecast of only one period. We find that with the adjusted regime switching portfolio selection algorithm as applied here, the performance of the optimal portfolio is highly improved even where portfolio weights are constrained to realistic values.

Eine empirische Untersuchung über die Verwertbarkeit von Kursziel-Prognosen zur Bestimmung erwarteter Renditen als Inputfaktoren für Portfolio-Optimierungsmodelle am Beispiel der ATX-Werte.

Markus Glawischnig, Universität Graz

Die Kursziele renommierter Analystenhäuser werden in Prognose-Renditen umgewandelt. Es werden daraus ein wertpapierspezifischer Erwartungswert und ein Risikomaß abgeleitet. Die praktische Umsetzung erfolgt im Black-Litterman Modell. Es ist geplant zu bestimmen, wie sensibel das Modell bezüglich neu eintreffender Kursziele reagiert. Es soll dadurch eine quantitativ begründete und nachvollziehbare Entscheidungsgrundlage geschaffen werden, die den Anspruch erhebt, intuitiven Entscheidungen zumindest ebenbürtig zu sein.

Investment Timing under Price Management on the CO₂-Market.

Stefan Palan, Universität Graz

Uncertainty about long-term climate policy is a major driving force in the evolution of the carbon market price. Since this price enters the investment decision process of regulated firms, a high level of regulatory driven price uncertainty increases the cost of capital for investors and might deter investments in new technologies at the company level. Therefore, a transparent and broadly predictable long-term carbon price is essential in encouraging emitters to invest in low-carbon technologies. In this paper we apply a real options approach (ROA) to assess the impact of climate change policy, especially price management in the form of a price floor, on investment decisions of a single firm in a competitive environment. By use of Monte Carlo simulation we analyze the effects of a regulatory determined minimum carbon price on the timing decision of a company to switch from a high-carbon “dirty” technology to a low-carbon “clean” technology. Since it accounts for a substantial proportion of total CO₂ emissions we choose the power sector for our analysis. Allowing for stochastic revenues, unit costs of production and CO₂ emission allowance prices, our first results identify an appropriate level of support for the CO₂-price lying between 50 and 60 Euro per ton. Although our results turn out to be quite sensitive with respect to the model parameter settings, they demonstrate that the carbon market can act as a policy instrument to stimulate technological change.

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