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We analytically show that a common across rich/poor individuals Stone-Geary utility function with subsistence consumption in the context of a simple two-asset portfolio-choice model is capable of qualitatively and quantitatively explaining: (i) the higher saving rates of the rich, (ii) the higher fraction of personal wealth held in risky assets by the rich, and (iii) the higher volatility of consumption of the wealthier. On the contrary, time-variant “keeping-up-with-the-Joneses” weighted average consumption which plays the role of moving benchmark subsistence consumption gives the same portfolio composition and saving rates across the rich and the poor, failing to reconcile the model with what micro data say. JEL Classification: G11, D91, E21, D81, D14, D11
This paper is the report of a study conducted by five people – four at Stanford, and one at the University of Wisconsin – which tried to establish whether computer-generated algorithms could "recognize" literary genres. You take 'David Copperfield', run it through a program without any human input – "unsupervised", as the expression goes – and ... can the program figure out whether it's a gothic novel or a 'Bildungsroman'? The answer is, fundamentally, Yes: but a Yes with so many complications that it is necessary to look at the entire process of our study. These are new methods we are using, and with new methods the process is almost as important as the results.
This paper studies the impact of the concentration of control, the type of controlling shareholder and the dividend tax preference of the controlling shareholder on dividend policy for a panel of 220 German firms over 1984-2005. While the concentration of control does not have an effect on the dividend payout, there is strong evidence that the type of controlling shareholder matters as family controlled firms have high dividend payouts whereas bank controlled firms have low dividend payouts. However, there is no evidence that the dividend preference of the large shareholder has an impact on the dividend decision. JEL Classification: G32, G35 Keywords: Dividend Policy, Payout Policy, Lintner Dividend Model, Tax Clientele Effects, Corporate Governance
In the microstructure literature, information asymmetry is an important determinant of market liquidity. The classic setting is that uninformed dedicated liquidity suppliers charge price concessions when incoming market orders are likely to be informationally motivated. In limit order book markets, however, this relationship is less clear, as market participants can switch roles, and freely choose to immediately demand or patiently supply liquidity by submitting either market or limit orders. We study the importance of information asymmetry in limit order books based on a recent sample of thirty German DAX stocks. We find that Hasbrouck’s (1991) measure of trade informativeness Granger-causes book liquidity, in particular that required to fill large market orders. Picking-off risk due to public news induced volatility is more important for top-of-the book liquidity supply. In our multivariate analysis we control for volatility, trading volume, trading intensity and order imbalance to isolate the effect of trade informativeness on book liquidity. JEL Classification: G14 Keywords: Price Impact of Trades , Trading Intensity , Dynamic Duration Models, Spread Decomposition Models , Adverse Selection Risk
Do firms buy their stock at bargain prices? : Evidence from actual stock repurchase disclosure
(2011)
We use new data from SEC filings to investigate how S&P 500 firms execute their open market repurchase programs. We find that smaller S&P 500 firms repurchase less frequently than larger firms, and at a price which is significantly lower than the average market price. Their repurchase activity is followed by a positive and significant abnormal return which lasts up to three months after the repurchase. These findings do not hold for large S&P 500 firms. Our interpretation is that small firms repurchase strategically, whereas the repurchase activity of large firms is more focused on the disbursement of free cash. JEL Classification: G14, G30, G35 Keywords: Stock Repurchases, Stock Buybacks, Payout Policy, Timing, Bid-Ask Spread, Liquidity
Regulations in the pre-Sarbanes–Oxley era allowed corporate insiders considerable flexibility in strategically timing their trades and SEC filings, for example, by executing several trades and reporting them jointly after the last trade. We document that even these lax reporting requirements were frequently violated and that the strategic timing of trades and reports was common. Event study abnormal re-turns are larger after reports of strategic insider trades than after reports of otherwise similar nonstrategic trades. Our results also imply that delayed reporting is detrimental to market efficiency and lend strong support to the more stringent trade reporting requirements established by the Sarbanes–Oxley Act. JEL Classification: G14, G30, G32 Keywords: Insider Trading , Directors' Dealings , Corporate Governance , Market Efficiency
This paper outlines a new method for using qualitative information to analyze the monetary policy strategy of central banks. Quantitative assessment indicators that are extracted from a central bank's public statements via the balance statistic approach are employed to estimate a Taylor-type rule. This procedure allows to directly capture a policymaker's assessments of macroeconomic variables that are relevant for its decision making process. As an application of the proposed method the monetary policy of the Bundesbank is re-investigated with a new dataset. One distinctive feature of the Bundesbank's strategy consisted of targeting growth in monetary aggregates. The analysis using the proposed method provides evidence that the Bundesbank indeed took into consideration monetary aggregates but also real economic activity and inflation developments in its monetary policy strategy since 1975. JEL Classification: E52, E58, N14 Keywords: Monetary Policy Rule, Statement Indicators, Bundesbank, Monetary Targeting
This paper analyzes the emergence of systemic risk in a network model of interconnected bank balance sheets. Given a shock to asset values of one or several banks, systemic risk in the form of multiple bank defaults depends on the strength of balance sheets and asset market liquidity. The price of bank assets on the secondary market is endogenous in the model, thereby relating funding liquidity to expected solvency - an important stylized fact of banking crises. Based on the concept of a system value at risk, Shapley values are used to define the systemic risk charge levied upon individual banks. Using a parallelized simulated annealing algorithm the properties of an optimal charge are derived. Among other things we find that there is not necessarily a correspondence between a bank's contribution to systemic risk - which determines its risk charge - and the capital that is optimally injected into it to make the financial system more resilient to systemic risk. The analysis has policy implications for the design of optimal bank levies. JEL Classification: G01, G18, G33 Keywords: Systemic Risk, Systemic Risk Charge, Systemic Risk Fund, Macroprudential Supervision, Shapley Value, Financial Network
A large empirical literature has shown that user fees signicantly deter public service utilization in developing #countries. While most of these results reflect partial equilibrium analysis, we find that the nationwide abolition of public school fees in Kenya in 2003 led to no increase in net public enrollment rates, but rather a dramatic shift toward private schooling. Results suggest this divergence between partial- and general-equilibrium effects is partially explained by social interactions: the entry of poorer pupils into free education contributed to the exit of their more affluent peers.
Existing studies from the United States, Latin America, and Asia provide scant evidence that private schools dramatically improve academic performance relative to public schools. Using data from Kenya—a poor country with weak public institutions—we find a large effect of private schooling on test scores, equivalent to one full standard deviation. This finding is robust to endogenous sorting of more able pupils into private schools. The magnitude of the effect dwarfs the impact of any rigorously tested intervention to raise performance within public schools. Furthermore, nearly twothirds of private schools operate at lower cost than the median government school.
Die Ergebnisse der Arbeit lassen sich wie folgt zusammenfassen: 1. Das Früherkennungssystem des § 91 Abs. 2 AktG ist kein „Risiko“-Früherkennungssystem, wie dies der IDW PS 340 annimmt. Daraus folgen zu weit reichende angebliche Risikomanagement- und Prüfpflichten. Eine fortlaufende und ständige Erfassung, Bewertung und Analyse von Einzelrisiken ist nämlich nicht erforderlich. Zwar mag im Einzelfall eine Risikosteuerung angezeigt sein, die sich einem umfassenden Risikomanagement annähert. Die über § 91 Abs. 2 AktG hinausgehenden Maßnahmen ergeben sich dann aber aus §§ 76, 93 AktG und sind insofern auch nicht Prüfungsgegenstand des Abschlussprüfers nach § 317 Abs. 4 HGB. 2. Der IDW PS 340 blendet die zentral wichtige Liquiditätssteuerung aus. Hier ist er zu eng und nicht spezifisch genug. Bestandsgefährdende Entwicklungen können nämlich auch durch Liquiditätsrisiken entstehen. § 91 Abs. 2 AktG verpflichtet daher die Gesellschaft zur Aufstellung eines Finanzplans, der künftige Zahlungsein- und Zahlungsausgänge einander gegenüberstellt. 3. Der IDW PS 340 besteht nicht hinreichend deutlich auf schriftlicher Dokumentation des Früherkennungssystems. Denn eine schriftliche Fixierung von Früherkennungs- und Überwachungssystem dient nicht nur der Funktionsfähigkeit dieser Systeme, sondern bildet auch die Prüfungsgrundlage, ohne die dem Abschlussprüfer eine hinreichende Prüfung nicht möglich ist.
Der Kontrollbegriff des WpÜG
(2011)
Die Bestimmungen des WpÜG über Übernahme- und Pflichtangebote knüpfen von jeher an das Halten von mindestens 30 Prozent der Stimmrechte einer Zielgesellschaft an. Der folgende Beitrag geht der Frage nach, ob dieser formale Kontrollbegriff des geltenden Rechts den Machtverhältnissen in börsennotierten Gesellschaften angemessen Rechnung trägt. Darüber hinaus hinterfragt er die systematische Stimmigkeit der unterschiedlichen Schwellenwerte für Kontrolle und Beherrschungsvermutung bei börsennotierten Gesellschaften.
Fazit und Ausblick: Gemessen an den hohen Anforderungen, die die Rechtsprechung und das juristische Schrifttum an Qualifikation und Aufgabenwahrnehmung der Aufsichtsratsmitglieder stellen, scheint
erheblicher Bedarf für eine Professionalisierung der Aufsichtsratstätigkeit zu bestehen. Tatsächlich dürften indessen die Erwartungen, die in die Überwachung der Geschäftsführung durch den Aufsichtsrat gesetzt werden, überzogen sein. Zudem brächte die Fortentwicklung des Aufsichtsrats zu einem Gremium professioneller Überwacher eine Reihe von Nachteilen mit sich, die die vermeintlichen Vorteile aufwiegen dürfte. Eine professionelle Überwachung der Geschäftsführung ließe sich daher möglicherweise besser im Vorstand selbst ansiedeln, indem ein oder mehrere Vorstandsmitglied(er) ausschließlich mit Überwachungsaufgaben betraut würde(n). Der Vorstand hat für die Rechtmäßigkeit, Ordnungsmäßigkeit und Zweckmäßigkeit der Organisation und der Entscheidungsprozesse innerhalb der Gesellschaft zu sorgen. Dazu gehört nicht nur die Überwachung des eigenen Ressorts, sondern auch die Pflicht, den Geschäftsbetrieb insgesamt zu beobachten und Missstände auch in anderen Ressorts zur Kenntnis des Gesamtvorstands zu bringen. Bereits das geltende Recht trägt damit dem Umstand Rechnung, dass effektive Überwachung ständige Präsenz im Unternehmen und die Unterstützung durch einen Stab von Mitarbeitern erfordert. Die Betrauung einzelner Vorstandsmitglieder mit hauptamtlichen Überwachungsaufgaben würde die aus diesen Gründen dem Vorstand ohnehin obliegende Aufsicht ausbauen, dem Aufsichtsrat einen auf Überwachung spezialisierten Ansprechpartner im Vorstand zur Verfügung stellen und auf diese Weise dazu beitragen, die Überwachungsaufgabe des Aufsichtsrats auf ein im Nebenamt realistischerweise zu bewältigendes Maß zurückzuführen.
"Buffer-stock" models of saving are now standard in the consumption literature. This paper builds theoretical foundations for rigorous understanding of the main features of such models, including the existence of a target wealth ratio and the proposition that aggregate consumption growth equals aggregate income growth in a small open economy populated by buffer stock savers. JEL Classification: D81, D91, E21 Keywords: Precautionary Saving, Buffer Stock Saving, Marginal Propensity to Consume, Permanent Income Hypothesis
The direct financial impact of the financial crisis has been to deal a heavy blow to investment-based pensions; many workers lost a substantial portion of their retirement saving. The financial sector implosion produced an economic crisis for the rest of the economy via high unemployment and reduced labor earnings, which reduced household contributions to Social Security and some private pensions. Our research asks which types of individuals were most affected by these dual financial and economic shocks, and it also explores how people may react by changing their consumption, saving and investment, work and retirement, and annuitization decisions. We do so with a realistically calibrated lifecycle framework allowing for time-varying investment opportunities and countercyclical risky labor income dynamics. We show that households near retirement will reduce both short- and long-term consumption, boost work effort, and defer retirement. Younger cohorts will initially reduce their work hours, consumption, saving, and equity exposure; later in life, they will work more, retire later, consume less, invest more in stocks, save more, and reduce their demand for private annuities. Keywords: Financial Crisis , Household Finance , Cycle Portfolio Choice , Labor Supply Classification: D1, G11, G23, G35, J14, J26, J32
The aim of this paper is to give the semantic profile of the Greek verb-deriving suffixes -íz(o), -én(o), -év(o), -ón(o), -(i)áz(o), and -ín(o), with a special account of the ending -áo/-ó. The patterns presented are the result of an empirical analysis of data extracted from extended interviews conducted with 28 native Greek speakers in Athens, Greece in February 2009. In the first interview task the test persons were asked to force(=create) verbs by using the suffixes -ízo, -évo, -óno, -(i)ázo, and -íno and a variety of bases which conformed to the ontological distinctions made in Lieber (2004). In the second task the test persons were asked to evaluate three groups of forced verbs with a noun, an adjective, and an adverb, respectively, by using one (best/highly acceptable verb) to six (worst/unacceptable verb) points. In the third task nineteen established verb pairs with different suffixes and the ending -áo/-ó were presented. The test persons were asked to report whether there was some difference between them and what exactly this difference was. The differences reported were transformed into 16 alternations. In the fourth task 21 established verbs with different suffixes were presented. The test persons were asked to give the "opposite" or "near opposite" expression for each verb. The rationale behind this task was to arrive at the meaning of the suffixes through the semantics of the opposites. In the analysis Rochelle's Lieber's (2004) theoretical framework is used. The results of the analysis suggest (i) a sign-based treatment of affixes, (ii) a vertical preference structure in the semantic structure of the head suffixes which takes into account the semantic make-up of the bases, and (iii) the integration of socioexpressive meaning into verb structures.
Using life-history survey data from eleven European countries, we investigate whether childhood conditions, such as socioeconomic status, cognitive abilities and health problems influence portfolio choice and risk attitudes later in life. After controlling for the corresponding conditions in adulthood, we find that superior cognitive skills in childhood (especially mathematical abilities) are positively associated with stock and mutual fund ownership. Childhood socioeconomic status, as indicated by the number of rooms and by having at least some books in the house during childhood, is also positively associated with the ownership of stocks, mutual funds and individual retirement accounts, as well as with the willingness to take financial risks. On the other hand, less risky assets like bonds are not affected by early childhood conditions. We find only weak effects of childhood health problems on portfolio choice in adulthood. Finally, favorable childhood conditions affect the transition in and out of risky asset ownership, both by making divesting less likely and by facilitating investing (i.e., transitioning from non-ownership to ownership).
We use data from the 2009 Internet Survey of the Health and Retirement Study to examine the consumption impact of wealth shocks and unemployment during the Great Recession in the US. We find that many households experienced large capital losses in housing and in their financial portfolios, and that a non-trivial fraction of respondents have lost their job. As a consequence of these shocks, many households reduced substantially their expenditures. We estimate that the marginal propensities to consume with respect to housing and financial wealth are 1 and 3.3 percentage points, respectively. In addition, those who became unemployed reduced spending by 10 percent. We also distinguish the effect of perceived transitory and permanent wealth shocks, splitting the sample between households who think that the stock market is likely to recover in a year’s time, and those who don’t. In line with the predictions of standard models of intertemporal choice, we find that the latter group adjusted much more than the former its spending in response to financial wealth shocks.
Das vorliegende Diskussionspapier ist die erweiterte and aktualisierte Fassung des Kapitels „Neoliberalismus und Arzt-Patient-Beziehung“ meines Buches „Zur sozialen Anatomie des Gesundheitswesens. Neoliberalismus und Gesundheitspolitik in Deutschland“ (Frankfurt 2005). Es geht dabei um die Ökonomisierung bzw. Kommerzialisierung eines sozialen Bereiches, der davor lange Zeit verschont wurde. Der Einfluss von Markt und Wettbewerb auf die Arzt-Patient- Beziehung werden beschrieben und analysiert sowie auf daraus folgende wichtige Veränderungen hingewiesen. Dabei zeigt sich, dass der Patient zunehmend zum Kunden wird und der Arzt immer intensiver unternehmerisch zu denken hat. Der Ermessensspielraum für ärztliche Entscheidungen, von Indikationsstellungen und therapeutischen Interventionen, werden davon nicht unerheblich berührt. Daraus ergeben sich ethische Aspekte, die schon vor einigen Jahrzehnten von der „kritischen Medizin“ beklagt wurden. Gesundheit wird hier als Menschenrecht gesehen. Als Gegenmodell zur um sich greifenden Kommerzialisierung gelten neue Formen der Versorgung, die auf der Basis von Solidarität beruhen.
Insurance contracts are often complex and difficult to verify outside the insurance relation. We show that standard one-period insurance policies with an upper limit and a deductible are the optimal incentive-compatible contracts in a competitive market with repeated interaction. Optimal group insurance policies involve a joint upper limit but individual deductibles and insurance brokers can play a role implementing such contracts for the group of clients. Our model provides new insights and predictions about the determinants of insurance.
Measuring confidence and uncertainty during the financial crisis: evidence from the CFS survey
(2011)
The CFS survey covers individual situations of banks and other companies of the financial sector during the financial crisis. This provides a rare possibility to analyze appraisals, expectations and forecast errors of the core sector of the recent turmoil. Following standard ways of aggregating individual survey data, we first present and introduce the CFS survey by comparing CFS indicators of confidence and predicted confidence to ifo and ZEW indicators. The major contribution is the analysis of several indicators of uncertainty. In addition to well established concepts, we introduce innovative measures based on the skewness of forecast errors and on the share of ‘no response’ replies. Results show that uncertainty indicators fit quite well with pattern of real and financial time series of the time period 2007 to 2010. Business Sentiment , Financial Crisis , Survey Indicator , Uncertainty CFS working paper series, 2010, 18. Revised Version July 2011
Japan's quest for energy security : risks and opportunities in a changing geopolitical landscape
(2011)
For much of the 20th century, economic growth was fueled by cheap oil-based energy supply. Due to increasing resource constraints, however, the political and strategic importance of oil has become a significant part of energy and foreign policy making in East and Southeast Asian countries. In Japan, the rise of China’s economic and military power is a source of considerable concern. To enhance energy security, the Japanese government has recently amended its energy regulatory framework, which reveals high political awareness of risks resulting from the looming key resources shortage and competition over access. An essential understanding that national energy security is a politically and economically sensitive area with a clear international dimension affecting everyday life is critical in shaping a nation’s energy future.
The overvaluation hypothesis (Miller 1977) predicts that a) stocks are overvalued in the presence of short selling restrictions and that b) the overvaluation increases in the degree of divergence of opinion. We design an experiment that allows us to test these predictions in the laboratory. The results indicate that prices are higher with short selling constraints, but the overvaluation does not increase in the degree of divergence of opinion. We further find that trading volume is lower and bid-ask spreads are higher when short sale restrictions are imposed. JEL Classification: C92, G14 Keywords: Overvaluation Hypothesis , Short Selling Constraints , Divergence of Opinion
If there is one thing to be learned from David Foster Wallace, it is that cultural transmission is a tricky game. This was a problem Wallace confronted as a literary professional, a university-based writer during what Mark McGurl has called the Program Era. But it was also a philosophical issue he grappled with on a deep level as he struggled to combat his own loneliness through writing. This fundamental concern with literature as a social, collaborative enterprise has also gained some popularity among scholars of contemporary American literature, particularly McGurl and James English: both critics explore the rules by which prestige or cultural distinction is awarded to authors (English; McGurl). Their approach requires a certain amount of empirical work, since these claims move beyond the individual experience of the text into forms of collective reading and cultural exchange influenced by social class, geographical location, education, ethnicity, and other factors. Yet McGurl and English's groundbreaking work is limited by the very forms of exclusivity they analyze: the protective bubble of creative writing programs in the academy and the elite economy of prestige surrounding literary prizes, respectively. To really study the problem of cultural transmission, we need to look beyond the symbolic markets of prestige to the real market, the site of mass literary consumption, where authors succeed or fail based on their ability to speak to that most diverse and complicated of readerships: the general public. Unless we study what I call the social lives of books, we make the mistake of keeping literature in the same ascetic laboratory that Wallace tried to break out of with his intense authorial focus on popular culture, mass media, and everyday life.
Am 1. Januar 2012 tritt das KORUS-Freihandelsabkommen zwischen Südkorea und den USA in Kraft. Mit dem KORUS-Freihandelsabkommen und dem vergleichbar umfangreichen, bereits seit Juli 2011 rechtskräftigen Abkommen mit der EU (KOREU) verfügt Südkoreas exportorientierte Volkswirtschaft über einen nahezu uneingeschränkten Zugang zu den beiden stärksten Wirtschaftsräumen der Welt, die gemeinsam mehr als 50 Prozent des weltweiten Bruttoinlandsprodukts (BIP) erwirtschaften. Nicht zuletzt angesichts der jüngsten globalen Finanz- und Wirtschaftskrise sowie des Stillstands der multilateralen Doha-Verhandlungsrunde zur globalen Handelsliberalisierung, setzen zahlreiche Staaten
in Ostasien wie auch Südkorea auf eine expansive und vor allem bilaterale Freihandelspolitik. In Seoul hat diese Politik mit den beiden jüngsten Abkommen ihren vorläufigen
Höhepunkt erreicht. Die weitere Handelsstrategie des Landes sieht eine Diversifizierung und Ausweitung der Freihandelspolitik vor.
* Insbesondere die jüngeren Abkommen mit Indien, den USA und der EU stellen eine Weiterentwicklung der bisherigen Freihandelspolitik Südkoreas dar. Verglichen
mit den anfänglichen Abkommen mit Chile oder auch Singapur haben diese umfangreichen und tiefgreifenden Vereinbarungen eine neue Qualität.
* In den neueren bilateralen Freihandelsprojekten Südkoreas mit dem Golfkooperationsrat oder Australien werden zunehmend auch Themen wie Rohstoff- und Ernährungssicherung in den Blick genommen. Mit dem Abschluss der Freihandelsabkommen werden auch politische Ziele verfolgt, wie zum Beispiel die Stärkung der Allianz mit den USA oder das Knüpfen
strategischer Partnerschaften über die ostasiatische Region hinaus.
* Vor allem für Japan stellen KORUS und KOREU eine ökonomische Herausforderung dar. Es ist möglich, dass nun in Ostasien, wie auch im gesamten pazifischen Raum, weitere große Freihandelsabkommen folgen werden.
Ernst Bloch pointed out in a particularly emphatic way that the concept of human dignity featured centrally in historical struggles against different forms of unjustified rule, i.e. domination – to which one must add that it continues to do so to the present day. The “upright gait,” putting an end to humiliation and insult: this is the most powerful demand, in both political and rhetorical terms, that a “human rights-based” claim expresses. It marks the emergence of a radical, context-transcending reference point immanent to social conflicts which raises fundamental questions concerning the customary opposition between immanent and transcendent criticism. For within the idiom of demanding respect for human dignity, a right is invoked “here and now,” in a particular, context-specific form, which at its core is owed to every human being as a person. Thus Bloch is in one respect correct when he asserts that human rights are not a natural “birthright” but must be achieved through struggle; but in another respect this struggle can develop its social power only if it has a firm and in a certain sense “absolute” normative anchor. Properly understood, it becomes apparent that these social conflicts always affect “two worlds”: the social reality, on the one hand, which is criticized in part or radically in the light of an ideal normative dimension, on the other. For those who engage in this criticism there is no doubt that the normative dimension is no less real than the reality to which they refuse to resign themselves. Those who critically transcend reality always also live elsewhere.
The title I have chosen seems to signal a tension, even a contradiction, in a number of respects. Democracy appears to be a form of political organisation and government in which, through general and public participatory procedures, a sufficiently legitimate political will is formed which acquires the force of law. Justice, by contrast, appears to be a value external to this context which is not so much linked to procedures of “input” or “throughput” legitimation but is understood instead as an output- or outcome-oriented concept. At times, justice is even understood as an otherworldly idea which, when transported into the Platonic cave, merely causes trouble and ends up as an undemocratic elite project. In methodological terms, too, this difference is sometimes signalled in terms of a contrast between a form of “worldly” political thought and “abstract” and otherworldly philosophical reflection on justice. In my view, we are bound to talk past the issues to be discussed under the heading “transnational justice and democracy” unless we first root out false dichotomies such as the ones mentioned. My thesis will be that justice must be “secularised” or “grounded” both with regard to how we understand it and to its application to relations beyond the state.
The aim of this paper is to examine what has been the role of information provision to the market throughout the crisis. We consider two main sources of information to the market, financial statements and information provided by credit rating agencies. We examine how these sources of information work and the effectiveness of their disclosure process during the crisis. Contrary to the commonly held view, fair value accounting did not have a major impact on the crisis development and severity. However, the structure and lack of accountability of credit rating agencies had a profound impact on their incentives, which may have jeopardized the accuracy of the whole rating process. We claim that the crisis experience has changed the way we think about information as well as market discipline and discuss policy implications and proposals for regulation. JEL Classification: G01, G24, G28, M41, M48
We make three points. First, the decade before the financial crisis in 2007 was characterized by a collapse in the yield on TIPS. Second, estimated VARs for the federal funds rate and the TIPS yield show that while monetary policy shocks had negligible effects on the TIPS yield, shocks to the latter had one-to-one effects on the federal funds rate. Third, these findings can be rationalized in a New Keynesian model.
We revisit the role of time in measuring the price impact of trades using a new empirical method that combines spread decomposition and dynamic duration modeling. Previous studies which have addressed the issue in a vector-autoregressive framework conclude that times when markets are most active are times when there is an increased presence of informed trading. Our empirical analysis based on recent European and U.S. data offers challenging new evidence. We find that as trade intensity increases, the informativeness of trades tends to decrease. This result is consistent with the predictions of Admati and Pfleiderer’s (1988) rational expectations model, and also with models of dynamic trading like those proposed by Parlour (1998) and Foucault (1999). Our results cast doubt on the common wisdom that fast markets bear particularly high adverse selection risks for uninformed market participants. JEL Classification: G10, C32 Keywords: Price Impact of Trades, Trading Intensity, Dynamic Duration Models, Spread Decomposition Models, Adverse Selection Risk
This paper studies the market quality of an internalization system which is designed as part of an open limit order book (the Xetra system operated by Deutsche Börse AG). The internalization sys-tem (Xetra BEST) guarantees a price improvement over the inside spread in the Xetra order book. We develop a structural model of this unique dual market environment and show that, while adverse selection costs of internalized trades are significantly lower than those of regular order book trades, the realized spreads (the revenue earned by the suppliers of liquidity) is significantly larger. The cost savings of the internalizer are larger than the mandatory price improvement. This suggests that internalization can be profitable both for the customer and the internalizer. JEL Classification: G10
In this paper we challenge the view that corporate bonds are always arm’s length debt. We analyze the effect of bond ratings on the stock price return to acquirers in M&A transactions, which tend to have significant effects on creditor wealth. We find acquirers abnormal returns to be higher if they are unrated, controlling for a wide variety of other effects identified in the literature. Tracing the difference in returns to distinct managerial decisions, we find that, everything else constant, rated firms increase their leverage in takeover transactions by less than their unrated counterparts. Consistent with a significant role for rating agencies, we find monitoring effects to be strongest when acquirer bonds are rated at the borderline between investment grade and junk. Finally, we are able to empirically exclude a large number of alternative explanations for the empirical regularities that we uncover. JEL Classification: G21, G24, G32, G34 Keywords: Acquisitions, Credit Ratings, Mergers and Acquisitions, Arm’s Length Debt, Abnormal Returns
In Deutschland und in fast allen Industrieländern finden sich mittlerweile Medikamentenwirkstoffe in nahezu allen Gewässern und vereinzelt auch im Trinkwasser. Auch wenn die Konzentrationen in der Regel sehr gering sind, lassen sich erste Anzeichen für Auswirkungen auf Wasserlebewesen nachweisen. Akute Folgen für die menschliche Gesundheit sind bisher nicht erwiesen. Es kann allerdings nicht ausgeschlossen werden, dass sich Langzeitfolgen dieser Niedrigstkonzentrationen entwickeln und unerwartete Effekte durch die Wechselwirkung zwischen verschiedenen Wirkstoffen (Cocktaileffekt) entstehen. Besonders gefährdet sind dabei sensible Bevölkerungsgruppen wie Kinder und chronisch Kranke. Es besteht daher nicht zuletzt aus Vorsorgegründen Handlungsbedarf. Das Problem der Medikamentenreste im Wasser ist bei den wichtigsten Akteuren des Gesundheitssystems weitgehend unbekannt. Auch wenn Wissen nicht mit Bewusstsein gleichgesetzt werden kann – denn es gibt auch das Phänomen des Nicht-Wissen-Wollens – geht es in einem ersten Schritt darum, fundiertes Wissen zu erzeugen. Nur auf Basis dieser Sensibilisierung können weitere Strategien umgesetzt und letztendlich Aufklärung und Verhaltensänderungen erreicht werden. Dabei geht es um die gesamte Alltagspraxis im Umgang mit Medikamenten. Diese umfasst Fragen der Verschreibung, der Compliance, der nichtmedikamentösen Krankheitsvorsorge bis hin zum Arzt-Patienten-Verhältnis. Das ist nämlich häufig von Missverständnissen und mangelnder Kommunikation über – vermeintliche – Verschreibungsnotwendigkeiten geprägt. Der erste Teil der Strategie für die Bevölkerung soll über unterschiedliche Kanäle und Medien drei unterschiedliche Zielgruppen ansprechen, die in einer empirischen Untersuchung vom ISOE identifiziert wurden und auf das angesprochene Problem ganz unterschiedlich reagieren: · ‚Die Verleugner/Relativierer‘ · ‚Die Aufklärungsinteressierten‘ · ‚Die Hypersensiblen‘ Jede Zielgruppe soll in der passenden sprachlichen und argumentativen Art und Weise durch spezifische Medien und mit dem richtigen Grad der Differenziertheit angesprochen werden. Dabei spielen „die Aufklärungsinteressierten“ eine Opinionleader-Rolle. Sie können über anspruchsvolle Medien mit sehr differenzierten Informationen versorgt werden und geben dieses Wissen dann in angemessener Form an ihre Gesprächspartner weiter. Der zweite Teil der Strategie für die Bevölkerung bezieht sich auf die Kommunikation richtiger Entsorgungswege für Altmedikamente. Ziel ist es, dass Medikamentenreste nur noch in der Apotheke, keinesfalls aber in der Spüle oder in der Toilette entsorgt werden. Auf Grundlage einer Analyse typischer Fehler in bereits bestehenden Kommunikationsmedien zu diesem Thema hat das ISOE Empfehlungen zur richtigen Konzeption von Infomaterialien erarbeitet. Bei der Ansprache der Apotheker geht es in einem ersten Schritt um die Vermittlung von Faktenwissen: Wir schlagen dazu eine PR-Kampagne vor, die Artikel in den wichtigsten Fachmedien platziert. Gleichzeitig soll das Thema auch Teil der Aus- und Fortbildung werden. Zusätzlich soll die Beraterfunktion der Apotheken gestärkt werden. Die spezielle Zielgruppe der umweltsensiblen Kunden würde durchaus positiv darauf reagieren, wenn sie auf die Problematik der Medikamentenreste im Wasser hingewiesen würde. Bei allen anderen Kunden können und sollen die Apotheker ihre Rolle als Berater wahrnehmen: Sie betonen, wie wichtig die korrekte Einnahme (Compliance) und adäquate Packungsgrößen sind und warnen ihre Kunden, insbesondere die älteren, auch vor potenziellen Fehleinnahmen. Bei der Kommunikationsstrategie für Ärzte geht es im ersten Schritt ebenfalls um Wissen. Dabei muss aber deren Selbstverständnis als Wissenschaftler bei gleichzeitig niedrigem Wissensstand in diesem speziellen Feld berücksichtigt werden. Hier muss der Weg einer ‚diskursiven Selbstaufklärung‘ beschritten werden. Das Thema Medikamentenreste im Wasser kann somit nicht von Laien von außen an die Ärzte herangetragen werden, sondern muss in wichtigen Medien der Ärzteschaft und durch Verbandsfunktionäre angenommen und kommuniziert werden (top-down). Wenn es im zweiten Schritt um eine Problemsensibilisierung geht, muss mit starkem Widerstand eines Teils der Ärzteschaft gerechnet werden. Sie könnten fürchten, dass eine Einmischung in Heilungspläne aus Umweltsicht droht und betonen, dass Ärzte nicht für Umweltfragen zuständig seien. Letztlich steht – das haben empirische Untersuchungen des ISOE gezeigt – hinter dieser Problemabwehr ein Tabu: Es soll nicht darüber gesprochen werden, dass in zahlreichen Praxen zu viel verschrieben wird. Diese Problematik kann tatsächlich nicht aus der Umweltperspektive angegangen werden. Doch decken sich hier die Ziele des Gewässerschutzes mit den ökonomischen Zielen eines sparsamen Umgangs mit Arzneimitteln. Bei jeder Kommunikationsmaßnahme für diese Zielgruppe muss berücksichtigt werden, dass sich die Ärzte von dem, was sie als ‚Dauergesundheitsreform‘ aller Regierungen wahrnehmen, gegängelt fühlen. Sie sind keinesfalls bereit, eine neue Form der Regulierung, diesmal aus Umweltgründen, hinzunehmen. Ganz anders wird das Problem von ‚kritischen Ärzten‘ wie Umweltmedizinern und von Ärzten mit Naturheilschwerpunkt gesehen. Sie interessieren sich für die Problematik, weil sie einen Zusammenhang zwischen Umweltqualität und Gesundheit sehen. Außerdem haben sie Patienten, die an möglichst wenig Medikamentenverschreibungen, dafür aber an einer ‚sprechenden Medizin‘ interessiert sind. Wenn eine Kommunikationsstrategie also auch das schwierige Problem der übermäßigen Verschreibungen angehen will, empfiehlt es sich, die Erfahrungen dieser Mediziner einzubeziehen und zusätzlich auf eine ‚Bottom-up-Strategie‘ abzuzielen. Mit der Umsetzung der strategischen Kommunikation sollte eine Agentur beauftragt werden, die Erfahrungen im ‚Issue Management‘ vorweisen kann. Weiterhin sollte die Agentur Kenntnisse im Social Marketing und der Beeinflussung von Verhalten haben. Alle wichtigen Entscheidungen sollten von einem Konsens-Gremium (Runder Tisch ‚MeriWa‘1) verabschiedet werden, in dem die Ärzteschaft, die Apotheker sowie die Verbraucherinnen und Verbraucher angemessen repräsentiert sind.
This paper addresses the open debate about the usefulness of high-frequency (HF) data in large-scale portfolio allocation. Daily covariances are estimated based on HF data of the S&P 500 universe employing a blocked realized kernel estimator. We propose forecasting covariance matrices using a multi-scale spectral decomposition where volatilities, correlation eigenvalues and eigenvectors evolve on different frequencies. In an extensive out-of-sample forecasting study, we show that the proposed approach yields less risky and more diversified portfolio allocations as prevailing methods employing daily data. These performance gains hold over longer horizons than previous studies have shown.
Capturing the zero: a new class of zero-augmented distributions and multiplicative error processes
(2011)
We propose a novel approach to model serially dependent positive-valued variables which realize a non-trivial proportion of zero outcomes. This is a typical phenomenon in financial time series observed at high frequencies, such as cumulated trading volumes. We introduce a flexible point-mass mixture distribution and develop a semiparametric specification test explicitly tailored for such distributions. Moreover, we propose a new type of multiplicative error model (MEM) based on a zero-augmented distribution, which incorporates an autoregressive binary choice component and thus captures the (potentially different) dynamics of both zero occurrences and of strictly positive realizations. Applying the proposed model to high-frequency cumulated trading volumes of both liquid and illiquid NYSE stocks, we show that the model captures the dynamic and distributional properties of the data well and is able to correctly predict future distributions.
In seiner ausführlichen Untersuchung unterschiedlicher philosophischer Ansätze zum Prinzip „Verantwortung“ führt Ludger Heidbrink (2003) aus, dass die Standardtheorie der „Verantwortung“ auf drei Pfeilern beruhe, „dem Subjekt der Verantwortung, dem Objekt der Verantwortung und der Instanz der Verantwortung“ (ebd.: S. 21 f.; Hervorhebung von B. H.). Dabei bezieht er sich auf einige philosophische Ansätze, die Verantwortung in einer mehrstelligen Relation verstehen: Eine Person hat (1) Verantwortung für etwas (2) vor und gegenüber jemandem (3) und wird nach Maßgabe von gewissen Kriterien beurteilt (4) (u. a. Lenk/Maring 1993; Höffe 1993). An dieser Definition wird deutlich, dass es sich bei „Verantwortung“ um ein zutiefst soziales Handlungsprinzip dreht, denn eine Person, die verantwortlich handelt, tritt immer in irgendeiner Form in Interaktion mit ihrer sozialen Umwelt. So kümmern sich beispielsweise Eltern um ihre Kinder; Arbeitsnehmer stellen im Rahmen kollegialer Arbeitsteilung ein Produkt her oder erfüllen eine Dienstleistung für einen Kunden. Selbst wer sich gegenüber einem Tier oder der Natur verantwortlich verhält, erfüllt dabei eine moralische Norm, deren Einhaltung die Gesellschaft von ihm erwartet. Daran wird deutlich, dass eine Person, auch wenn sie sich in ihrem Handeln nicht direkt auf andere Menschen bezieht, gegenüber Personen oder Instanzen die Folgen ihres Verhaltens verantworten muss, was bedeutet, dass sie im Rahmen der Rechenschaftspflicht letztlich auch in eine Interaktion mit anderen Menschen tritt. Nur von mündigen Menschen kann Verantwortung für ihr Handeln erwartet werden. Der intersubjektive Charakter des Verantwortungspostulats lässt normalerweise auch zu, dass sich die beteiligten Personen über die Voraussetzungen verständigen können, unter denen das geforderte Handeln möglich ist oder war. Denn meistens genügt allein der Willen einer Person nicht zur Übernahme von Verantwortung.
This paper reconsiders the effect of investor sentiment on stock prices. Using survey-based sentiment indicators from Germany and the US we confirm previous findings of predictability at intermediate time horizons. The main contribution of our paper is that we also analyze the immediate price reaction to the publication of sentiment indicators. We find that the sign of the immediate price reaction is the same as that of the predictability at intermediate time horizons. This is consistent with sentiment being related to mispricing but is inconsistent with the alternative explanation that sentiment indicators provide information about future expected returns. JEL Classification: G12, G14 Keywords: Investor Sentiment , Event Study , Return Predictability
This paper examines to what extent the build-up of 'global imbalances' since the mid-1990s can be explained in a purely real open-economy DSGE model in which agents' perceptions of long-run growth are based on filtering observed changes in productivity. We show that long-run growth estimates based on filtering U.S. productivity data comove strongly with long-horizon survey expectations. By simulating the model in which agents filter data on U.S. productivity growth, we closely match the U.S. current account evolution. Moreover, with household preferences that control the wealth effect on labor supply, we can generate output movements in line with the data.
This paper examines to what extent the build-up of "global imbalances" since the mid-1990s can be explained in a purely real open-economy DSGE model in which agents’ perceptions of long-run growth are based on filtering observed changes in productivity. We show that long-run growth estimates based on filtering U.S. productivity data comove strongly with long-horizon survey expectations. By simulating the model in which agents filter data on U.S. productivity growth, we closely match the U.S. current account evolution. Moreover, with household preferences that control the wealth effect on labor supply, we can generate output movements in line with the data. JEL Classification: E13, E32, D83, O40
This paper outlines important lessons for monetary policy. In particular, the role of inflation targeting, which was much acclaimed prior to the financial crisis and since then has not lost much of its endorsement, is critically reviewed. Ignoring the relation between monetary policy and asset prices, as is the case in this monetary policy approach, can lead to financial instability. In contrast, giving, inter alia, monetary factors a role in central banks’ policy decisions, as is done in the ECB’s encompassing approach, helps prevent these potentially harmful side effects and thus allows for fostering financial stability. Finally, this paper makes a case against increasing the central banks’ inflation target. JEL Classification: E44, E52, E58 Keywords: Inflation Targeting, Asset Prices, Financial Stability, ECB