G24 Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies (Updated!)
(Un)anticipated monetary policy in a DSGE model with a shadow banking system
Manuel M. F. Martins
- Motivated by the U.S. events of the 2000s, we address whether a too low for too long interest
rate policy may generate a boom-bust cycle. We simulate anticipated and unanticipated monetary
policies in state-of-the-art DSGE models and in a model with bond financing via a shadow banking
system, in which the bond spread is calibrated for normal and optimistic times. Our results suggest
that the U.S. boom-bust was caused by the combination of (i) too low for too long interest rates,
(ii) excessive optimism and (iii) a failure of agents to anticipate the extent of the abnormally
Has Europe Been Catching Up? : An Industry Level Analysis of Venture Capital Success over 1985–2009
- After nearly two decades of US leadership during the 1980s and 1990s, are Europe’s venture capital (VC) markets in the 2000s finally catching up regarding the provision of financing and successful exits, or is the performance gap as wide as ever? Are we amid an overall VC performance slump with no encouraging news? We attempt to answer these questions by tracking over 40,000 VC-backed firms stemming from six industries in 13 European countries and the US between 1985 and 2009; determining the type of exit – if any – each particular firm’s investors choose for the venture.
Going public - going private : the case of VC-backed firms
- We investigate the decisions of listed firms to go private once again. We start by revealing that while a significant number of firms which go public is VC-backed, an overproportional share of these VC-backed firms go private later on (they stay on the exchange for an average of 8.5 years). We interpret this very robust pattern such that IPOs of VC-backed firms are to a large extent a temporary rather than a permanent feature of the corporate governance of these firms. We investigate various potential hypotheses why VCs actually seem to be able to bring marginal firms to the exchange by relating the going-private decisions to various characteristics of the IPO market as well as to VC characteristics. We find strong support for the certification ability of VCs: more experienced and reputable VCs are more able to bring marginal firms to public exchanges via an IPOs. These marginal firms backed-by more reputable and experienced VCs are more likely to go private later on. Hence, our analysis suggests that IPOs backed by experienced VCs are most likely to be a temporary rather than the final stage in the life of the portfolio firm. We find no support that reputable VCs underprice their IPO-exits more implying that they have no need to leave more money on the table to take the marginal firms public.
Does sophistication affect long-term return expectations? : Evidence from financial advisers' exam scores
- We use unique data from financial advisers’ professional exam scores and combine it with other variables to create an index of financial sophistication. Using this index to explain long-term stock return expectations, we find that more sophisticated financial advisers tend to have lower return expectations. A one standard deviation increase in the sophistication index reduces expected returns by 1.1 percentage points. The effect is stronger for emerging market stocks (2.3 percentage points). The sophistication effect contributes 60% to the model fit, while employer fixed effects combined contribute less than 30%. These results help understand the formation of potentially excessively optimistic expectations.