Browsing Working Papers (FI) by Title
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Bajlum, Claus; Tind Larsen, Peter (København, 2007)[More information][Less information]
Abstract: This paper estimates the impact of accounting transparency on the term structure of CDS spreads for a large cross-section of rms. Using a newly developed measure of accounting transparency in Berger, Chen & Li (2006), we nd a downward-sloping term structure of transparency spreads. Estimating the gap between the high and low transparency credit curves at the 1, 3, 5, 7 and 10-year maturity, the transparency spread is insigni cant in the long end but highly signi cant and robust at 20 bps at the 1-year maturity. Furthermore, the eect of accounting transparency on the term structure of CDS spreads is largest for the most risky rms. These results are strongly supportive of the model by Du¢ e & Lando (2001), and add an explanation to the underprediction of short-term credit spreads by traditional structural credit risk models. URI: http://hdl.handle.net/10398/7189 Files in this item: 1
ssrn-id1006161.pdf (443.3Kb) -
Rose, Caspar (København, 2002)[More information][Less information]
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Er Nørbyrapportens anbefalinger til gavn for aktionærerne?Rose, Caspar (København, 2004)[More information][Less information]
Abstract: Abstract: This article presents an empirical analysis of board composition and financial performance using a unique sample of Danish listed firms. In 2002, a group consisting of four prominent business leaders formulated Denmark’s own code of good corporate governance, entitled the Nørby report, The report consists of various recommendations aiming at strengthen Danish firms competitiveness and value creation including some specific recommendations concerning board composition. However, the analysis shows that none of the recommendations impact Tobin’s Q. Specifically, board size, proportion of insiders, positions held by board members in other firms do not significantly impact Tobin’s Q. The analysis only finds that the average age of the board has a significantly negative impact on performance. Board diversity, measured by the fraction of women and foreigners in boards as well as the educational background of board members does not impact performance either. URI: http://hdl.handle.net/10398/7138 Files in this item: 1
endeligt_wp_2004_2.pdf (675.6Kb) -
Model choice and volatility calibrationBajlum, Claus; Tind Larsen, Peter (København, 2007)[More information][Less information]
Abstract: When identifying relative value opportunities across credit and equity markets, the arbitrageur faces two major problems, namely positions based on model misspeci cation and mismeasured inputs. Using credit default swap data, this paper addresses both concerns in a convergence-type trading strategy. In spite of dierences in assumptions governing default and calibration, we nd the exact structural model linking the markets second to timely key inputs. Studying an equally-weighted portfolio of all relative value positions, the excess returns are insigni cant when based on a traditional volatility from historical equity returns. However, relying on an implied volatility from equity options results in a substantial gain in strategy execution and highly signi cant excess returns - even when small gaps are exploited. The gain is largest in the speculative grade segment, and cannot be explained from systematic market risk factors. Although the strategy may seem attractive at an aggregate level, positions on individual obligors can be very risky. URI: http://hdl.handle.net/10398/7196 Files in this item: 1
ssrn-id956839.pdf (424.3Kb) -
evidence from the Copenhagen Stock ExchangeNeumann, Robert; Voetmann, Torben (København, 1999)[More information][Less information]
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evidence from the copenhagen stock exchangeVoetmann, Torben (København, 2000)[More information][Less information]
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Abstract: The article examines how government spending is determined in a closed economy where the nominal wage is pre-set through contracts and the wage setters have perfect foresight regarding subsequent policy decisions. The monetary regime affects government spending because: (i) with a pre-set nominal wage, a given change in government spending has different effects on employment and inflation under different monetary regimes, and (ii) the authorities’ inclination to expand government spending is affected by the inflation rate which depends on the monetary regime. If the costs related to inflation are high, a comparison between monetary regimes suggests that welfare is highest under nominal income targeting where the nominal income target is determined to bring about price stability. Keywords: Monetary regimes; fiscal policy; monetary non-neutrality. JEL classicification: E42, E61, E62. URI: http://hdl.handle.net/10398/7174 Files in this item: 1
endeligt_wp_2005-2.pdf (237.6Kb) -
Rangvid, Jesper; Sørensen, Carsten (København, 2000)[More information][Less information]
URI: http://hdl.handle.net/10398/7163 Files in this item: 1
rangvid_soerensen_wp2000-8.pdf (945.5Kb) -
Rose, Caspar (København, 2001)[More information][Less information]
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with an application to initial public offerings in DenmarkJakobsen, Jan; Sørensen, Ole (København, 2000)[More information][Less information]
URI: http://hdl.handle.net/10398/7192 Files in this item: 1
jakobsen_soerensen_decomposing.pdf (507.9Kb) -
Møller, Michael; Parum, Claus; Sørensen, Thomas (København, 2000)[More information][Less information]
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Rangvid, Jesper; Sørensen, Carsten (København, 1998)[More information][Less information]
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Evidence from DenmarkBechmann, Ken L.; Raaballe, Johannes (København, 2004)[More information][Less information]
Abstract: 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 Files in this item: 1
2004_1.pdf (360.0Kb) -
Bechmann, Ken L.; Hjortshøj, Toke L. (København, 2007)[More information][Less information]
Abstract: 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 Files in this item: 1
2007_25.pdf (347.2Kb) -
evidence from changes in institutional and strategic investors´ equity holdingsNeumann, Robert; Voetmann, Torben (København, 1999)[More information][Less information]
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Sørensen, Carsten; Trolle, Anders Bjerre (København, 2004)[More information][Less information]
Abstract: 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 Files in this item: 1
endeligt_wp_2004_8_030105.pdf (427.9Kb) -
Raahauge, Peter (København, 2003)[More information][Less information]
Abstract: 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 Files in this item: 1
wp-141.pdf (347.7Kb) -
Raahauge, Peter (København, 2001)[More information][Less information]
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Lyse Hansen, Thomas; Astrup Jensen, Bjarne (København, 2004)[More information][Less information]
Abstract: 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 Files in this item: 1
endeligt_wp__2004_10_.pdf (365.3Kb) -
Gormsen, Niels Joachim Christfort (Frederiksberg, 2018)[More information][Less information]
Abstract: 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 Files in this item: 1
Niels Gormsen.pdf (5.568Mb)
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