Department of Finance (FI) Titler
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Møller, Michael; Parum, Claus; Sørensen, Thomas (København, 2000)[Flere oplysninger][Færre oplysninger]
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Rangvid, Jesper; Sørensen, Carsten (København, 1998)[Flere oplysninger][Færre oplysninger]
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Evidence from DenmarkBechmann, Ken L.; Raaballe, Johannes (København, 2004)[Flere oplysninger][Færre oplysninger]
Resume: Abstract It is often asserted that stock splits and stock dividends are purely cosmetic events. However, many studies have documented several stock market effects associated with stock splits and stock dividends. This paper examines the effects of these two types of events for the Danish stock market. Consistent with the existing literature, the two events are associated with a significantly positive announcement effect of ap- proximately 2.5%. However, when examining the two events more carefully, several important results are obtained. First, a firm's motivation for announcing the two events is completely different. Second, the positive stock market reaction is closely related to associated changes in a firm's payout policy, but the relationship varies for the two types of events. Finally, there is only very weak evidence for a change in the liquidity of the stock. On the whole, after controlling for the firm's payout policy, the results suggest that a stock split is a cosmetic event and that a stock dividend on its own is considered negative news. Key words: Stock splits; Stock dividends; Cash dividends; Signaling; Liquidity URI: http://hdl.handle.net/10398/7181 Filer i denne post: 1
2004_1.pdf (360.0Kb) -
Bechmann, Ken L.; Hjortshøj, Toke L. (København, 2007)[Flere oplysninger][Færre oplysninger]
Resume: New accounting standards require ¯rms to expense the costs of option-based compensation (OBC), but the associated valuations o®er many challenges for ¯rms. Earlier research has documented that ¯rms in the U.S. generally underreport the values of OBC by manipulating the inputs used for valuation purposes. This paper examines the values of OBC disclosed by Danish ¯rms. The results suggest that ¯rms experi ence some di±culties in valuing OBC, but interestingly, there is no clear evidence of deliberate underreporting. For example, there is no evidence that ¯rms use manipulated values for the Black-Scholes parameters in their valuations. Furthermore, ¯rms determine the expected time to maturity in a way that is generally consistent with the guidelines provided by the new accounting standards. The ¯ndings di®er from those of the U.S., but is consistent with the more limited use of OBC and the lower level of attention paid to these values in Denmark. However, the di®erences can also be due to the fact that several Danish ¯rms do not provide the information required regarding their OBC, which is clearly a very e®ective way of hiding the true values. URI: http://hdl.handle.net/10398/7143 Filer i denne post: 1
2007_25.pdf (347.2Kb) -
evidence from changes in institutional and strategic investors´ equity holdingsNeumann, Robert; Voetmann, Torben (København, 1999)[Flere oplysninger][Færre oplysninger]
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Sørensen, Carsten; Trolle, Anders Bjerre (København, 2004)[Flere oplysninger][Færre oplysninger]
Resume: We derive an explicit solution to the portfolio problem of a power utility investor with preferences for wealth at a ¯nite investment horizon. The investor can invest in assets with return dynamics described as part of a general multivariate model. The modeling framework encompasses discrete-time VAR-models where some of the state-variables (e.g. expected excess returns) may not be directly observable. A realistic multivariate model is estimated and applied to analyze the portfolio implications of investment horizon and return predictability when real interest rates and expected excess returns on stock and bonds are not directly observed but must be estimated as part of the problem faced by the investor. The solution exhibits small variability in portfolio allocations over time compared to the case when excess returns are assumed observable. JEL Classification: G11 Keywords: Portfolio choice, predictability, VAR, unobserved state-variables, hedging demands URI: http://hdl.handle.net/10398/7151 Filer i denne post: 1
endeligt_wp_2004_8_030105.pdf (427.9Kb) -
Christensen, Peter Ove; Flor, Christian Riis; Lando, David; Miltersen, Kristian R. (, 2014)[Flere oplysninger][Færre oplysninger]
Resume: We consider a dynamic trade-off model of a firm’s capital structure with debt renegotiation. Debt holders only accept restructuring offers from equity holders backed by threats which are in the equity holders’ own interest to execute. Our model shows that in a complete information model in which taxes and bankruptcy costs are the only frictions, violations of the absolute priority rule (APR) are typically optimal. The size of the bankruptcy costs and the equity holders’ bargaining power affect the size of APR violations, but they have only a minor impact on the choice of capital structure. URI: http://hdl.handle.net/10398/9101 Filer i denne post: 1
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Kallestrup, René (Frederiksberg, 2012)[Flere oplysninger][Færre oplysninger]
Resume: The Global Financial Crisis which started in 2007 is a defining economic event of our lifetime. Recessions and public bailouts of banking systems have resulted in concerns about the solvency of sovereigns in recent years as many Eurozone countries face substantial fiscal pressures. The exact causes of the Global Financial Crisis are still debated but it is unlikely to be the outcome of one single event. In a review of the Global Financial Crisis based on 21 books on the topic, Lo (2011) summarises the underlying causes and policy prescriptions: ”there is still significant disagreement as to what the underlying causes of the crisis were, and even less agreement as to what to do about it ... Like World War II, no single account of this vast and complicated calamity is sufficient to describe it.” The listed causes range from global capital flows, poor regulation, regulatory capture, inequality, high leverage, skewed economic incentives of borrowers and lenders, etc. Gorton and Metrick (2012) also contain an interesting summary of the literature written in recent years and in ”Lessons from the Financial Crisis” edited by Berd (2010) several chapters from academic researchers analyse the ongoing crisis. URI: http://hdl.handle.net/10398/8450 Filer i denne post: 1
Rene_Kallestrup.pdf (1.375Mb) -
Jessen, Cathrine; Poulsen, Rolf (, 2012)[Flere oplysninger][Færre oplysninger]
Resume: In this paper the empirical performance of ve di erent models for barrier op- tion valuation is investigated: the Black-Scholes model, the constant elasticity of variance model, the Heston stochastic volatility model, the Merton jump-di usion model, and the in nite activity Variance Gamma model. We use time-series data from the USD/EUR exchange rate market: standard put and call (plain vanilla) option prices and a unique set of observed market values of barrier options. The models are calibrated to plain vanilla option prices, and prediction errors at dif- ferent horizons for plain vanilla and barrier option values are investigated. For plain vanilla options, the Heston and Merton models have similar and superior performance for prediction horizons up to one week. For barrier options, the continuous-path models (Black-Scholes, constant elasticity of variance, and Hes- ton) do almost equally well, while both models with jumps (Merton and Variance Gamma) perform markedly worse. URI: http://hdl.handle.net/10398/9179 Filer i denne post: 1
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Raahauge, Peter (København, 2003)[Flere oplysninger][Færre oplysninger]
Resume: Rational expectations models make stringent assumptions on the agent's knowledge about the true model. This paper introduces a model in which the rational agent realizes that using a given model involves approximation errors, and adjusts behavior accordingly. If the researcher accounts for this empirical rationality on part of the agent, the resulting empirical model assigns likelihood to the data actually observed, unlike in the unmodified rational expectations case. A Lucas (1978)-type asset pricing model which incorporates empirical rationality is constructed and estimated using U.S. stock data. The equilibrium asset pricing function is seriously affected by the existence of approximation errors and the descriptive properties and normative implications of the model are significantly improved. This suggests that investors do not | and should not | ignore approximation errors. Keywords: Approximation errors, model uncertainty, estimation of structural models, rational expectations, asset pricing. URI: http://hdl.handle.net/10398/7139 Filer i denne post: 1
wp-141.pdf (347.7Kb) -
Raahauge, Peter (København, 2001)[Flere oplysninger][Færre oplysninger]
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Lyse Hansen, Thomas; Astrup Jensen, Bjarne (København, 2004)[Flere oplysninger][Færre oplysninger]
Resume: It is a delicate matter to trade spot products and financial derivatives in energy markets. Op- posite to bond and stock markets, the underlying assets are real products and a significant part of the demand for them represents a real need for the products, which can only be substituted away with some difficulties or, in some cases, only in a prohibitively costly manner. This is particularly true in the spot market, where the demand is almost always met, but where the spot price processes can be quite different from the spot price processes conventionally used in the pricing of derivatives. This pattern of real demand is also the main reason for the existence of the well-known convenience yield in energy markets. URI: http://hdl.handle.net/10398/7185 Filer i denne post: 1
endeligt_wp__2004_10_.pdf (365.3Kb) -
Rzeznik, Aleksandra Anna (Frederiksberg, 2017)[Flere oplysninger][Færre oplysninger]
Resume: This thesis consists of three essays investigating financial and real estate markets and identifying a relationship between them. A 2008 financial crises provides a perfect example of sizeable interactions between US housing market and equity prices, where a negative shock to house prices triggered a word-wide recession. Therefore, understanding forces driving investors behaviour and preferences, which in turn affect asset prices in both equity and housing market are of great interest. URI: http://hdl.handle.net/10398/9436 Filer i denne post: 1
Aleksandra Rzeznik.pdf (1.986Mb) -
Gjedsted Nielsen, Mads (Frederiksberg, 2014)[Flere oplysninger][Færre oplysninger]
Resume: The rst essay examines the relationship between publicly and privately traded commercial real estate and macroeconomic risk. To represent publicly traded real estate, I use exchange listed US Real Estate Investment Trusts (REITs), and to proxy for direct and privately traded real estate, I use a transaction based index (TBI) based on the data in the NCREIF database. Because the fundamental asset of the two investment types are the same, it seems reasonable to assume that they should be related in the long run. In the short run there are, however, several investment-vehicle speci c reasons why this need not be the case. For example, REITs are publicly listed on stock exchanges, and are thus expected to share a lot of commonalities with other publicly traded stocks. This is in fact also found by Goetzmann and Ibbotson [1990], Ross and Zisler [1991], and Myer and Webb [1994]. The fact that REITs are traded on exchanges makes them more liquid than direct real estate investments, and investors might therefore accept a lower risk premium for holding REITs, than for holding direct real estate. However, the lower contemporaneous correlation between direct real estate and the general stock market gives direct real estate a diversi cation bene t that may make investors accept a lower risk premium for investing in direct real estate. URI: http://hdl.handle.net/10398/9035 Filer i denne post: 1
Mads_Gjedsted_Nielsen.pdf (1.841Mb) -
Tomio, Davide (Frederiksberg, 2017)[Flere oplysninger][Færre oplysninger]
Resume: The first essay investigates how credit risk, the risk that a bond issuer will default, affects bond market liquidity. Specifically, we depart from the current literature in that we analyze the direct and indirect channels through which credit risk affects market liquidity, rather than determining whether both are priced in the bond. We focus on the Italian sovereign bond market, which allows us to determine how central bank interventions affect the sensitivity of the liquidity provision by market makers to default risk. We motivate our empirical analysis with a simple model of a risk averse market maker, holding an inventory of a risky asset and setting her optimal marginal quotes (and, therefore, the optimal bid-ask spread), in the presence of margin constraints and borrowing costs. The margins, set by a clearing house, depend on the risk of the asset, as measured by the CDS spread, and the actions of the central bank. The CDS market is fundamental to the market maker’s and the clearing house’s decisions, since it is from the CDS market that they deduce the future volatility of the asset return. In addition, the market maker can pledge her assets at the central bank to finance her positions at rates influenced by the central bank’s actions. The model provides several empirical predictions that we test in the empirical section of the paper. URI: http://hdl.handle.net/10398/9482 Filer i denne post: 1
Davide Tomio.pdf (2.469Mb) -
Klingler, Sven (Frederiksberg, 2017)[Flere oplysninger][Færre oplysninger]
Resume: The rst essay focuses on Credit default swap (CDS) premiums of safe sovereigns, that is, the insurance against the default of countries with a low credit risk, like Germany, Japan, or the United States. We motivate the essay by establishing the following two stylized facts. First, we document that there is a large market for insurance against the default of safe sovereigns and that the CDS premiums for these sovereigns are substantial, sometimes exceeding 100 basis points. Second, we show that there is virtually no relationship between CDS premiums and bond yield spreads, which are measured as the spread between bond yield and risk-free rate, for safe sovereigns. This nding is in opposition to the no-arbitrage theory that CDS premiums and yield spreads should move in lockstep. Motivated by these stylized facts, we investigate the following two questions: First, what are the motives behind purchasing insurance against the default of safe sovereigns? Second, what drives safe-haven CDS premiums if not credit risk? URI: http://hdl.handle.net/10398/9502 Filer i denne post: 1
Sven Klingler.pdf (2.498Mb) -
Stenbo Nielsen, Mads (Frederiksberg, 2011)[Flere oplysninger][Færre oplysninger]
Resume: The thesis consists of three essays that cover different aspects of correlation modelling in corporate default risk. Each essay is self-contained and can be read independently. Essay I: Correlation in corporate defaults: Contagion or conditional independence? Essay II: Systematic and idiosyncratic default risk in synthetic credit markets. Essay III: Credit spreads across the business cycle. URI: http://hdl.handle.net/10398/8370 Filer i denne post: 1
Mads_Stenbo_Nielsen.pdf (5.032Mb) -
Bajlum, Claus (København, 2008)[Flere oplysninger][Færre oplysninger]
Resume: This Ph.D. thesis consists of three self-contained chapters, which can be read independently. The chapters are interrelated through their use of structural credit risk models and a credit derivative known as the Credit Default Swap (CDS). Chapter 1 estimates the impact of accounting transparency on the term structure of CDS spreads for a large cross-section of firms. Chapter 2 analyzes the use of CDS spreads in a convergence-type trading strategy known as capital structure arbitrage. Finally Chapter 3 estimates the time-series behaviour of the credit risk premium in the market for Credit Default Swaps. URI: http://hdl.handle.net/10398/6520 Filer i denne post: 1
claus_bajlum.pdf (1.513Mb) -
Gormsen, Niels Joachim Christfort (Frederiksberg, 2018)[Flere oplysninger][Færre oplysninger]
Resume: This thesis concerns the empirical relation between risk and return in equities. It studies why the expected return on stocks as a whole varies over time and why there are predictable cross-sectional di↵erences in the return on individual stocks. The thesis consists of three chapters which can be read independently. The first chapter addresses why the expected return on the market portfolio varies over time. The market portfolio is a claim to all future cash flows earned by the firms in the stock market. I study the expected return to these future cash flows individually. I find that the expected return to the distant-future cash flows increases by more in bad times than the expected return to near-future cash flows does. This new stylized fact is important for understanding why the expected return on the market portfolio as a whole varies over time. In addition, it has strong implications for which economic model that drives the return to stocks. Indeed, I find that none of the canonical asset pricing models can explain this new stylized fact while also explaining the previously documented facts about stock returns. The second chapter, called Conditional Risk, studies how the expected return on individual stocks is influenced by the fact that their riskiness varies over time. We introduce a new ”conditional-risk factor”, which is a simple method for determining how much of the expected return to individual stocks that can be explained by time variation in their market risk, i.e. market betas. Using this new factor, we find that around 20% of the cross-sectional variation in expected stock returns worldwide can be explained by such time variation in market betas. The third chapter studies why stocks with low market betas have high risk-adjusted returns. To shed light on this low-risk e↵ect, we decompose all stocks’ market betas into their volatility and their correlation with the market portfolio. We find that both stocks with lower volatility and stocks with lower correlation have higher risk-adjusted returns. The last fact, that stocks with low correlation have high risk-adjusted returns, is particularly important because it helps distinguish between competing theories of the low-risk e↵ect. Indeed, the high risk-adjusted returns to low-correlation stocks are consistent with leverage based theories of the low-risk e↵ect, but it is not immediately implied by competing behavioral theories we consider in the paper. URI: http://hdl.handle.net/10398/9636 Filer i denne post: 1
Niels Gormsen.pdf (5.568Mb) -
Liu, Yun (Frederiksberg, 2016)[Flere oplysninger][Færre oplysninger]
Resume: This Ph.D. thesis is composed of four independent research papers in the field of Market Design. It begins with a general introduction for all four papers and ends with a brief conclusion. In this thesis, I study the impact of heterogeneous market participants on allocation outcomes in different market mechanisms; in addition, how to design alternative mechanisms that can more effectively allocate scarce resources with diverse economic and social goals. Chapter 1 studies the impact of affirmative action policies in the context of school choice. It addresses the following two questions: what are the causes of possible perverse consequence of affirmative action policies, and when the designer can effectively implement affirmative actions without unsatisfactory outcomes. Using the minority reserve policy in the student optimal stable mechanism as an example, I show that two acyclicity conditions, type-specific acyclicity and strongly type-specific acyclicity, are crucial for effective affirmative action policies. However, these two cycle conditions are almost impossible to be satisfied in any finite market in practice. Given the limitation of the point-wise effectiveness in finite markets, I further illustrate that the minority reserve policy is approximately effective in the sense that the probability of a random market containing type-specific cycles converges to zero when the copies of schools grow to infinite. Chapter 2 addresses the question of how ex ante asymmetry affects bidders’ equilibrium strategies in two popular multi-unit auction rules: uniform-price auction (UPA) and discriminatory-price auction (DPA). I characterize the set of asymmetric monotone Bayes–Nash equilibria in a simple multi-unit auction game in which two units of a homogeneous object are auctioned among a set of bidders. I argue that bidders’ strategic behavior essentially comes from their diverse market positions (i.e., the winning probability and the probability of deciding the market-clearing price). That is, if a bidder has a relatively strong market position, she has less incentive to shade her bid for the second unit in a UPA, whereas in a DPA, weaker bidders tend to bid more aggressively on both of two units. Following Chapter 2, Chapter 3 further analyzes and contrasts bidders’ collusion incentives at the ex ante stage. My results indicate that the UPA is more vulnerable to collusion than the DPA in term of the expected per-member payoff and the core-stability. In the last chapter, I show that a variant of the Vickrey-Clarke-Groves auction, Ausubel’s clinching auction, is vulnerable to collusion in the sense that it always has a nonempty core. I further discuss an isomorphism relation between group strategy-proofness and non-bossiness in allocation, and the incompatibility between efficient allocation and non-bossiness in finite auction markets. URI: http://hdl.handle.net/10398/9363 Filer i denne post: 1
Yun_Liu.pdf (1.321Mb)