Paris December 2017
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Presentation
The 15th Paris December Finance Meeting is organized in downtown Paris on December 21, 2017 by EUROFIDAI (European Financial Data Institute) and ESSEC Business School with the participation of AFFI (French Finance Association).
In 2017, the meeting is jointly sponsored by CERESSEC / CDC Institute for Economic Research / CNRS / Institut Louis Bachelier / Fondation Banque de France in Money, Finance and Banking / Equipex BEDOFIH project (European high frequency financial database) / Amundi / Ardian / "Regulation and Systemic Risk" ACPR Chair.
All researchers in finance are invited to present in English their latest research in all areas of finance and insurance, with a special attention given to papers including empirical analysis.
A special prize for the Best Paper of the Meeting will be awarded.
In 2017, 302 papers were submitted for presentation at the meeting and only one out of 5 papers was accepted, indicating rigorous selection criteria.
The Paris December Finance Meeting is one of the top 2 European conferences in terms of the quality of the papers presented.
An international reach
In 2017, the submissions were received from :
the U.S. (83), France (43), Germany (35), the U.K. (24), Switzerland (18), Austria (17), Canada (10), Italy (8), Portugal (7), Spain (6), China (5), Sweden (5), Taiwan (5), Belgium (4), Finland (4), South Korea (4), the Netherlands (4), Norway (4), Singapore (4), Denmark (2), Chile (1), Cyprus (1), Greece (1), India (1), Ireland (1), Israel (1), Jamaica (1), Japan (1), Kuwait (1), Lebanon (1).
OUR SPONSORS :
Committee
2017 scientific committee
- President : Patrice Fontaine (EUROFIDAI, CNRS)
- Vice-president : Jocelyn Martel (ESSEC Business School)
- Members :
Yacine Ait-Sahalia Hervé Alexandre Nihat Atkas Patrick Augustin Anne Balter Jean-Noël Barrot Philippe Bertrand Véronique Bessière Bruno Biais Romain Boulland Marie Brière Marie-Hélène Broihanne Luciano Campi Catherine Casamatta Georgy Chabakauri Pierre Collin-Dufresne Ian Cooper Ettore Croci Matt Darst Eric de Bodt François Degeorge Olivier Dessaint Alberta Di Giuli Christian Dorion Bernard Dumas Mathias Efing Ruediger Fahlenbrach Patrice Fontaine Thierry Foucault Pascal François Andras Fulop Roland Füess Marc Gabarro Jean-François Gajewski Edith Ginglinger Peter Gruber Alex Guembel Terrence Hendershott Georges Hübner Julien Hugonnier Heiko Jacobs Monique Jeanblanc Piqué Sonia Jimenez Maria Kasch Alexandros Kostakis Olivier Lecourtois Jongsub Lee Laurence Lescourret Abraham Lioui Elisa Luciano Yannick Malevergne Roberto Marfé Jocelyn Martel Maxime Merli Sophie Moinas Franck Moraux Duc N'Guyen Lars Norden Clemens Otto Loriana Pelizzon Fabricio Perez Christophe Pérignon Ludovic Phalippou Alberto Plazzi Joël Petey Patrice Poncet Sébastien Pouget Jean-Luc Prigent François Quittard-Pinon Catherine Refait-Alexandre Jean-Paul Renne Patrick Roger Jeroen Rombouts Mathieu Rosenbaum Julien Sauvagnat Patrick Sentis Olivier Scaillet Paolo Sodini Morten Sorensen Ariane Szafarz Christophe Spaenjers Peter Tankov Roméo Tédongap Boris Vallée Philip Valta Guillaume Vuillemey Ryan Williams Rafal Wojakowski Alminas Zaldokas |
Princeton University Université Paris Dauphine WHU Otto Beisheim School of Management McGill University Tilburg University MIT Sloan School of Management Université Aix-Marseille Université de Montpellier TSE ESSEC Business School Amundi, Université Paris Dauphine, Université Libre de Bruxelles Université de Strasbourg London Schoool of Economics TSE & IEA, Université de Toulouse 1 Capitole London School of Economics EPFL London Business School Universita Cattolica del Sacro Cuore Board of Governors of the Federal Reserve Université de Lille 2 University of Lugano University of Toronto ESCP Europe HEC Montréal INSEAD University of Geneva & SFI EPFL & SFI EUROFIDAI - CNRS HEC Paris HEC Montréal ESSEC Business School University of Saint Gallen University of Mannheim IAE Lyon Université Paris-Dauphine Universita della Svizzeria Italiana Toulouse School of Economics Berkeley University HEC Liège EPFL University of Mannheim Université d'Evry Grenoble INP Humboldt University of Berlin University of Manchester EM Lyon University of Florida ESSEC Business School EDHEC Collegio Carlo Alberto Université de Paris 1 Panthéon-Assas Collegio Carlo Alberto ESSEC Business School Université de Strasbourg Toulouse School of Economics Université de Rennes 1 IPAG EBAPE/FVG HEC Paris Goethe University Wilfrid Laurier University HEC Paris Oxford University University of Lugano & SFI Université de Strasbourg ESSEC Business School Toulouse School of Economics Université de Cergy-Pontoise EM Lyon Université Franche-Comté HEC Lausanne Université de Strasbourg ESSEC Business School Université Paris 6 Bocconi University Université de Montpellier University of Geneva & SFI Stockholm School of Economics Copenhagen Business School Université Libre de Bruxelles HEC Paris ENSAE ParisTech ESSEC Business School Harvard Business School University of Geneva HEC Paris University of Arizona Surrey Business School HKUST |
Call for papers
The 15th Paris December Finance Meeting is organized in downtown Paris on December 21, 2017 by EUROFIDAI (European Financial Data Institute) and ESSEC Business School with the participation of AFFI (French Finance Association).
It is jointly sponsored by CERESSEC / CDC Institute for Economic Research / CNRS / Institut Louis Bachelier / Fondation Banque de France in Money, Finance and Banking / Equipex BEDOFIH project (European high frequency financial database) / Amundi / Ardian / "Regulation and Systemic Risk" ACPR Chair.
All researchers in finance are invited to present in English their latest research in all areas of finance and insurance :
Asset Pricing, Banking/Financial Intermediation, Bankruptcy, Behavioral Finance, Capital Structure, Corporate Governance, Derivatives, Ethical Finance, Entrepreneurial Finance, Financial Analyst, Financial Crisis, Financial Econometrics, Financial Mathematics, Financial Risks, Hedge Funds/Mutual Funds, Historical Finance, Insurance, Interest Rates, International Finance, Investment Policy/Capital Budgeting, Market Microstructure / Liquidity, Merger and Acquisition, Ownership, Payout Policy, Portfolio Management, Private Equity/Venture Capital, Banking Regulation and Systemic Risk, Risk Management, Security Issuance/IPO.
In previous years, approximately one in six submitted papers was accepted. The Paris December Finance Meeting is one of the top 2 European conferences in terms of the quality of the papers presented.
Prizes will be awarded for the best papers.
PhD and job market paper sessions will also be organized, so all job market and PhD papers are welcome.
SUBMISSION PROCESS
Only on line submissions will be considered for the 2017 Paris December Finance Meeting. Before filling the application form, please read the following instructions:
- Prepare 2 files in pdf format:
- An anonymous version of the paper (the complete paper without the name(s) of the author(s), without the acknowledgements and without any indication of author’s affiliation)
- A complete version of the paper including the following information: title, name(s) of the author(s), abstract, keywords, email address for each author, complete address(es)
- The abstract you will fill in the submission form is limited to 150 words.
- To complete your submission you will have to classify your paper according to a list of keywords. This choice will define the session referees judging your paper.
- Each submission will be charged 45€.
Click on the "Submission" tab to access on line submissions.
DEADLINE
Papers must be submitted on line by June 5, 2017.
PAPER DIFFUSION
Accepted papers will be posted on the Financial Economic Network (SSRN) and the website of EUROFIDAI.
Submission
SUBMISSION PROCESS
Only on line submissions on SSRN will be considered for the 2017 Paris December Finance Meeting. Before filling the application form, please read the following instructions:
- Prepare 2 files in pdf format:
- An anonymous version of the paper (the complete paper without the name(s) of the author(s), without the acknowledgements and without any indication of author’s affiliation)
- A complete version of the paper including the following information: title, name(s) of the author(s), abstract, keywords, email address for each author, complete address(es)
- The abstract you will fill in the submission form is limited to 150 words.
- To complete your submission you will have to classify your paper according to a list of keywords. This choice will define the session referees judging your paper.
- Each submission will be charged 45€.
SUBMISSIONS ARE CLOSED SINCE JUNE 5, 2017
DEADLINE
Papers must be submitted on line by June 5, 2017.
PAPER DIFFUSION
Accepted papers will be posted on the Financial Economic Network (SSRN) and the website of EUROFIDAI.
Program
Show all sessions
Planning from December 21, Thursday | |
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09:00 | Asset Pricing 1 |
Asset Pricing 1 (12/21/2017 at 09:00)Presiding : Philippe Bertrand (Université Aix-Marseille)The Volatility-of-Volatility Term StructureAuthors : Branger Nicole (University of Muenster - Finance Center Muenster); Huelsbusch Hendrik (University of Muenster - Finance Center Muenster); Kraftschik Alexander (University of Muenster - Finance Center Muenster);Intervenant: Hendrik Hülsbusch Discussant: Sumudu Watugala (Cornell University - Dyson School of Applied Economics and Management) This paper investigates the volatility-of-volatility (VVIX) term structure. The Download paper The Time-Varying Risk of Macroeconomic DisastersAuthors : Marfè Roberto (University of Torino - Collegio Carlo Alberto); Pénasse Julien (University of Luxembourg);Intervenant: Roberto Marfè Discussant: Hendrik Hülsbusch (University of Muenster - Finance Center Muenster) The rare disasters model of asset prices suggests stock market variations reflect persistent fluctuations in the probability of a large decline in consumption. This paper estimates this probability from macroeconomic data alone, using a dataset of 42 countries over more than a century. We find that disaster risk is volatile and persistent, strongly correlates with the dividend-price ratio, and forecasts stock returns. Our evidence suggests that disaster risk can rationalize the equity premium and risk-free rate puzzles, the excess volatility puzzle, and the predictability of aggregate stock market returns by the dividend-price ratio. A variable disaster model calibrated with our risk estimates confirms these results under standard assumptions. While former works support the plausibility of disaster risk hypothesis, we provide direct evidence that disaster risk can rationalize price fluctuations. Download paper Economic Uncertainty and Commodity Futures VolatilityAuthors : Watugala Sumudu W. (Cornell University - Dyson School of Applied Economics and Management);Intervenant: Sumudu Watugala Discussant: Roberto Marfè (University of Torino) This paper investigates the dynamics of commodity futures volatility. I derive the variance decomposition for the futures basis to show how unexpected excess returns result from new information about the expected future interest rates, convenience yields, and risk premia. This motivates my empirical analysis of the volatility impact of economic and inflation regimes and commodity supply-demand shocks. Using data on major commodity futures markets and global bilateral commodity trade, I analyze the extent to which commodity volatility is related to fundamental uncertainty arising from increased emerging market demand and macroeconomic uncertainty, and control for the potential impact of financial frictions introduced by changing market structure and index trading. I find that a higher concentration in the emerging market importers of a commodity is associated with higher futures volatility. Commodity futures volatility is significantly predictable using variables capturing macroeconomic uncertainty. I examine the conditional variation in the asymmetric relationship between returns and volatility, and how this relates to the futures basis and sensitivity to consumer and producer shocks. Download paper |
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09:00 | Banking 1 (sponsored by ACPR Chair) |
Banking 1 (sponsored by ACPR Chair) (12/21/2017 at 09:00)Presiding : Christophe Pérignon (HEC Paris)Credit Supply Shocks and Human Capital: Evidence from a Change in Accounting NormsAuthors : Barbosa Luciana (Bank of Portugal - Economic Research Department); Bilan Andrada (Swiss Finance Institute); Celerier Claire (University of Toronto - Rotman School of Management);Intervenant: Andrada Bilan Discussant: Corey Garriott (Bank of Canada) This paper investigates the effect of an exogenous credit supply shock triggered by a change in accounting norms on firm accumulation of human capital. In 2005, the introduction of new reporting norms for defined-benefit pension plans in Portugal led to large increases in the value of bank pension liabilities. Affected banks increased both direct contributions to pension plans and prudential deductions from Tier 1 capital, subsequently reducing their supply of credit. We first document that firms in a relationship with affected banks do not perfectly substitute credit. Second, we find that affected firms reduce employment. We show that these employment effects are stronger among unskilled workers, but also among the highly educated ones. Workers holding a college degree, or holding complex occupations, are more likely to leave affected firms. These results suggest that credit supply shocks can affect firm accumulation of human capital, with implications for firm long-term productivity. Download paper Banking Regulation and Market MakingAuthors : Cimon David A. (Bank of Canada); Garriott Corey (Bank of Canada);Intervenant: Corey Garriott Discussant: Raphael Flore (University of Cologne) Recent banking regulation can harm bond market liquidity by motivating a shift to Download paper The Optimal Capital Structure in Presence of Financial AssetsAuthors : Flore Raphael (University of Cologne - Center for Macroeconomic Research (CMR));Intervenant: Raphael Flore Discussant: Andrada Bilan (Swiss Finance Institute) Trade-off theories of capital structure describe how a firm chooses its leverage for a Download paper |
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09:00 | Corporate Governance 1 |
Corporate Governance 1 (12/21/2017 at 09:00)Presiding : Sridhar Arcot (ESSEC Business School)Is There a Local Culture of Corruption in the U.S.?Authors : Dass Nishant (Georgia Institute of Technology - Scheller College of Business); Nanda Vikram K. (University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics); Xiao Steven Chong (University of Texas at Dallas - Naveen Jindal School of Management);Intervenant: Steven Xiao Discussant: Alexei Ovtchinnikov (HEC Paris) U.S. corporations headquartered in states with greater public corruption are prone to more unethical behavior, reflective of a state-level "culture-of-corruption". We test for state-level differences by exploiting passage of Foreign Corrupt Practices Act (FCPA) that curtailed bribery of foreign officials. Firms in corrupt states, especially firms trading with more corrupt countries, suffer greater value (Tobin's Q) and performance (ROA) decline following FCPA, indicating larger losses from restrictions on bribery. Culture-of-corruption is also manifest in greater agency problems: Firms in corrupt states are more likely to manage earnings, face securities fraud litigation and be adversely affected by state-level anti-takeover laws. Download paper Elephants (or Donkeys) at the Gate: Political Ideology in M&AAuthors : Alhashel Bader (Kuwait University); Alnahedh Saad (University of Colorado at Boulder - Department of Finance);Intervenant: Saad Alnahedh Discussant: Steven Xiao (University of Texas) We study the effect of shared political identity between acquirers and targets on merger outcomes. In a sample of publicly traded U.S. mergers, we find that targets are more likely to be acquired by an acquirer of a similar political orientation. We document that acquirers in politically matched mergers experience significantly worse cumulative abnormal returns around the merger announcement compared to their non-politically matched counterparts. Acquirers in those mergers pay less takeover premiums, less advisory fees, and experience worse post-merger operating performance. We also find that target executive retention rates are higher, and that the top management team receives a larger bonus post-merger in politically matched mergers. Our results indicate that politically matched mergers create less value to shareholders. Download paper Debt and Incentives in Political CampaignsAuthors : Ovtchinnikov Alexei V. (HEC Paris (Groupe HEC) - Finance Department); Valta Philip (University of Bern);Intervenant: Alexei Ovtchinnikov Discussant: Saad Alnahedh (University of Colorado) Debt is a significant source of funding of political campaigns, with almost half of all campaigns relying on some form of debt. In this paper, we analyze the legislative incentives created by this type of debt financing. We find that indebted politicians raise more funds in subsequent elections, especially from special interest groups. We also show evidence of votes-for-money arrangements, especially among indebted politicians, whereby politicians vote for the benefit of those interest groups that help funding their reelection campaigns. The results are consistent with the view that debt creates legislative distortions and exacerbates the principal-agent problem because it forces indebted politicians to take policy positions that are not aligned with the local constituents' interests. Download paper |
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09:00 | Market Microstructure 1 (sponsored by BEDOFIH) |
Market Microstructure 1 (sponsored by BEDOFIH) (12/21/2017 at 09:00)Presiding : Patrice Fontaine (EUROFIDAI-CNRS)The Role of Pre-Opening Mechanisms in Fragmented MarketsAuthors : Boussetta Selma (University of Toulouse 1 - Université Toulouse 1 Capitole); Lescourret Laurence (ESSEC Business School); Moinas Sophie (Toulouse School of Economics);Intervenant: Selma Boussetta Discussant: Sebastian Vogel (Ecole Polytechnique Fédérale de Lausanne) To facilitate price discovery, Euronext Paris has always relied on a transparent pre-opening phase and on a call auction to open continuous markets. Fast trading, competition from alternative trading venues and the poor volume at the open (2%) however question the role of these non-trading sessions. Using a unique dataset of stocks cross-traded on Euronext Paris, BATS and Chi-X, we explore the behavior of traders during the preopen based on their speed and nature of orders (proprietary, agency or market-making). We show that slow brokers submit orders very early, and most of them are executed within the day. In contrast, fast prop traders or dedicated liquidity providers only participate in the last half-hour. Interestingly the pre-opening activity of slow brokers is strongly related to the price discovery process across trading venues. Finally, we show that although tentative clearing prices of the preopen contain information, they are followed by a reversal in the following 15 minutes across the different platforms, reflecting price pressure and liquidity issues around the open. Download paper When to Introduce Electronic Trading Platforms in Over-The-Counter Markets?Authors : Vogel Sebastian (Ecole Polytechnique Fédérale de Lausanne);Intervenant: Sebastian Vogel Discussant: Norman Seeger (VU University Amsterdam) I study a hybrid over-the-counter (OTC) market structure in which traders have the choice of obtaining an asset either in a bilateral market or on an electronic trading platform. In a hybrid market (HM), turnover is higher and expected prices are lower than in a pure bilateral market (PBM). I present sufficient conditions under which dealers' profits are higher in the HM than in the PBM and vice versa. Dealers can increase their profits in the HM by colluding to keep their activity on the platform at a certain level. The model also delivers several other empirical implications regarding prices, trading volume and the traders' choices of trading venue under the two different market structures. Download paper Informed Trading in the Index Option MarketAuthors : Kaeck Andreas (University of Sussex); van Kervel Vincent (Pontifical Catholic University of Chile); Seeger Norman (VU University Amsterdam);Intervenant: Norman Seeger Discussant: Selma Boussetta (University of Toulouse 1) We estimate a structural model of informed trading in option markets. We decompose option order flow into exposures to the underlying asset (through the option delta) and its volatility (through the option vega). We then use these order flow exposures to predict changes in the underlying asset and volatility in a vector autoregressive (VAR) model. The model measures informed trading in the aggregate option market, as option order flows can be meaningfully combined across options with different strike prices and maturities. Further, the order flow aggregation increases statistical power, which is necessary to identify informed trading on the two components. The model also yields a novel price impact parameter of volatility speculation. Estimates using options on the S&P500 confirm that option trades are indeed informed about changes in both the underlying and volatility, although the magnitude of the former is substantially larger. Download paper |
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10:30 | Coffee break |
Coffee break (12/21/2017 at 10:30) |
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11:00 | Asset Pricing 2 |
Asset Pricing 2 (12/21/2017 at 11:00)Presiding : Abraham Lioui (EDHEC)The Lost Capital Asset Pricing ModelAuthors : Andrei Daniel (University of California, Los Angeles (UCLA) - Anderson School of Management); Cujean Julien (University of Maryland - Robert H. Smith School of Business); Wilson Mungo Ivor (University of Oxford - Said Business School);Intervenant: Julien Cujean Discussant: José Afonso Faias (Universidade Catolica Portuguesa) A flat Securities Market Line is not evidence against the CAPM. Under the Roll (1977) critique, the CAPM is a “lost city of Atlantis,” empirically invisible. In a noisy rational-expectations economy, there exists an information gap between the average investor who holds the market and the empiricist who does not observe the market portfolio. The CAPM holds for the investor, but appears flat to the empiricist. This distortion is empirically substantial and explains, for instance, why “Betting Against Beta” works; BAB really bets on true beta. Macroeconomic announcements reduce the distortion—for a fleeting moment the empiricist catches a glimpse of the CAPM. Download paper Time-Varying Predictability of Consumption Growth, Macro-Uncertainty, and Risk PremiumsAuthors : Barroso Pedro (UNSW Australia Business School, School of Banking and Finance); Boons Martijn (New University of Lisbon - Nova School of Business and Economics); Karehnke Paul (UNSW Australia Business School, School of Banking and Finance);Intervenant: Martijn Boons Discussant: Julien Cujean (University of Maryland) We show that the relation between state variables, such as the t-bill rate and term Download paper ESG Risks and the Cross-Section of Stock ReturnsAuthors : Gloßner Simon (Catholic University of Eichstaett-Ingolstadt);Intervenant: Simon Gloßner Discussant: Martijn Boons (New University of Lisbon) This paper finds that environmental, social, and governance (ESG) risks generate negative Download paper |
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11:00 | Banking 2 |
Banking 2 (12/21/2017 at 11:00)Presiding : Sonia Jimenez (Université Grenoble Alpes)Should the Government Be Paying Investment Fees on $3 Trillion of Tax-Deferred Retirement Assets?Authors : Landoni Mattia (Southern Methodist University (SMU) - Finance Department); Zeldes Stephen P. (Columbia Business School - Finance and Economics);Intervenant: Mattia Landoni Discussant: Simon Straumann (University of Saint Gallen) Governments incentivize retirement saving by allowing individuals to contribute to Download paper Dynamic Fire-Sale Externalities and Rollover Risk SpilloversAuthors : Doh Hyunsoo (Nanyang Technological University);Intervenant: Hyunsoo Doh Discussant: Mattia Landoni (Southern Methodist University) This paper studies financial contagion in a short-term debt market by developing a dynamic model with heterogeneous banks in which outside investors of assets are financially constrained and have different asset-management skills. Each bank's creditors make withdrawal decisions at their maturity dates. Each outside investor chooses an optimal time to purchase failed assets. The rollover risks of distressed banks propagate to other banks through the expected changes in a market-clearing liquidation price of assets. In contrast to He and Xiong (2012), the model implies providing more credit support or extending debt maturities alleviates a crisis by increasing the liquidation price. Download paper Illuminating the Dark Side of Financial Innovation: The Role of Investor InformationAuthors : Ammann Manuel (University of Saint Gallen - School of Finance); Arnold Marc (University of Saint Gallen - School of Finance); Straumann Simon (University of Saint Gallen - School of Finance);Intervenant: Simon Straumann Discussant: Hyunsoo Doh (Nanyang Technological University) This paper investigates the impact of imperfect investor information on financial Download paper |
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11:00 | Behavioral Finance 1 |
Behavioral Finance 1 (12/21/2017 at 11:00)Presiding : Jean-François Gajewski (IAE Lyon)Wall Street Crosses Memory Lane: How Witnessed Returns Affect Professionals' Expected ReturnsAuthors : Hoffmann Arvid O. I. (University of Adelaide - Business School); Iliewa Zwetelina (Centre for European Economic Research (ZEW)); Jaroszek Lena (Copenhagen Business School - Department of Finance);Intervenant: Zwetelina Iliewa Discussant: Erik Theissen (University of Mannheim) Witnessing stock market history in the making leaves behind a vivid story, but does not provide valuable information. Nevertheless, well-versed finance professionals extrapolate from witnessed returns when forming beliefs about expected returns which we show by using a unique dataset regarding professionals' career start in the finance industry. This result is robust to controlling for all publicly available information and interpersonal differences. Additionally, we find that returns witnessed early on in a career are more formative than those witnessed recently. Among the potential channels through which witnessed returns might affect professionals' expectations, a judgmental bias appears the most plausible. Download paper All Is Not Lost that Is Delayed: Overconfidence and Investment FailureAuthors : Betzer André (BUW- Schumpeter School of Business and Economics); van den Bongard Inga (University of Mannheim - Finance Area); Theissen Erik (University of Mannheim - Finance Area); Volkmann Christine (University of Wuppertal);Intervenant: Erik Theissen Discussant: Alexander Klos (University of Kiel) Using a unique panel data set of private German firms over the period 2002 to 2013 we analyze the relation between managerial overconfidence and investment policy in small and medium-sized firms. We construct direct estimates of managerial overconfidence that are based on sales forecasts. We find that overconfident managers are more likely to invest, and that this relation is driven by expansion investments (as opposed to replacement investments). Most importantly, we provide empirical evidence on the determinants of failed (downsized, delayed or abandoned) corporate investment projects. Controlling for socio-demographic variables and firm characteristics, we find that investment projects planned by overconfident managers are more likely to fail. When we differentiate between the three categories of failure (abandoning, delaying, and downsizing) we find that overconfident managers are more likely to delay, rather than to abandon or downsize, an investment project. We offer an explanation that is based on the theory of cognitive dissonance. Download paper Overpriced WinnersAuthors : Daniel Kent D. (Columbia Business School - Finance and Economics); Klos Alexander (University of Kiel - Institute for Quantitative Business and Economics Research (QBER)); Rottke Simon (University of Muenster - Finance Center Muenster);Intervenant: Alexander Klos Discussant: Zwetelina Iliewa (Centre for European Economic Research) A strong increase in a firm's market price over the past year is generally associated with higher future abnormal returns, consistent with the momentum anomaly. However, for a small set of firms for which arbitrage is limited, high past returns forecast strongly negative future abnormal returns. We propose a dynamic model in which increased unwarranted optimism by a set of speculators leads to dynamic mispricing effects. Consistent with this model, we show a set of firms with high past returns, low institutional ownership, and high recent changes in short interest earns persistently low returns going forward. A strategy that goes short the overpriced winners and long other winners generates a Sharpe-ratio of 1.12; its returns cannot be explained by commonly used risk-factors. Download paper |
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11:00 | Investment |
Investment (12/21/2017 at 11:00)Presiding : Boris Vallee (Harvard Business School - Finance Unit)The Real Effects of Short Selling RestrictionsAuthors : Schiller Christoph M. (University of Toronto - Rotman School of Management);Intervenant: Christoph Maximilian Schiller Discussant: Marc Deloof (University of Antwerp) Short selling enhances the price feedback mechanism for corporate investment decisions. Using the staggered introduction and repeal of short selling restrictions around the world, we show that the sensitivity of investment to Tobin's Q is 25% higher when short selling is permitted. Further, short selling strengthens the link between the completion of announced M&A deals and the price reaction on announcement day. The positive impact of short selling on investment-Q sensitivity is higher for firms with low analyst coverage and institutional ownership, mitigated for cross-listed firms, and subsequently results in improved firm performance. The effects do not appear to be driven by a higher total amount of information in prices, faster price discovery, improved firm disclosure, or differences in governance. Our results suggest that short selling incentivizes traders to acquire private information new to firm managers, thus enhancing managers' reliance on stock prices as an information signal for investment decisions. Download paper The Flight Home Effect in Multinational Internal Capital Markets During the Great RecessionAuthors : Deloof Marc (University of Antwerp); Montalto Fabiola (University of Antwerp);Intervenant: Marc Deloof Discussant: Thorsten Martin (HEC Paris) We investigate whether the Great Recession induced a flight home effect in internal capital markets of European multinational firms. Using a difference-in-difference approach, we find a significant reduction in group borrowings by subsidiaries of European multinationals in Italy since 2008, compared to a propensity score matched sample of subsidiaries of local business groups. While the reduction in group borrowings by multinational subsidiaries is partially counterbalanced by an increase in bank borrowings, multinational subsidiaries reduced their investments more than local group subsidiaries. These effects are significantly stronger for subsidiaries of multinationals headquartered in a European country that has been hit harder by the Great Recession. The reduction in group borrowings is larger when the foreign parent is located at a greater distance from subsidiary. Download paper The Effect of Hold-Up Problems on Corporate Investment: Evidence from Import Tariff ReductionsAuthors : Martin Thorsten (HEC Paris - Finance Department); Otto Clemens A. (Singapore Management University);Intervenant: Thorsten Martin Discussant: Christoph Maximilian Schiller (University of Toronto) We provide empirical evidence of the importance of hold-up problems for investment decisions in a large number of U.S. manufacturing industries. We exploit variation in the severity of hold-up problems between upstream suppliers and downstream customers resulting from import tariff reductions in upstream industries. We find that downstream customers respond by increasing investment. As theory predicts, the effect is stronger if the customers are not vertically integrated with their suppliers, if they have little bargaining power, if their suppliers produce differentiated inputs, and if high uncertainty inhibits the use of long-term contracts. Download paper |
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12:30 | Lunch |
Lunch (12/21/2017 at 12:30) |
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13:45 | Hedge Funds / Portfolio Management (sponsored by AMUNDI) |
Hedge Funds / Portfolio Management (sponsored by AMUNDI) (12/21/2017 at 13:45)Presiding : Jocelyn Martel (ESSEC Business School)Limits of Arbitrage under the Microscope: Evidence from Detailed Hedge Fund Transaction DataAuthors : von Beschwitz Bastian (Board of Governors of the Federal Reserve System); Lunghi Sandro (Inalytics Limited); Schmidt Daniel (HEC Paris (Groupe HEC) - Finance Department);Intervenant: Bastian von Beschwitz Discussant: Laurent Barras (McGill University) We exploit detailed transaction and position data for a sample of long-short equity hedge funds to document new facts about the trading activity of sophisticated investors. We find that the initiation of both long and short positions is associated with significant abnormal returns, suggesting that the hedge funds in our sample possess investment skill. In contrast, the closing of long and short positions is followed by return continuation, implying that hedge funds close their positions too early and leave money on the table. As we demonstrate with a simple model, this behaviour can be explained by hedge funds being (risk) capital constrained and facing position monitoring costs. Consistent with our model, we document that the return continuation following closing orders is more pronounced when these constraints become more binding (e.g., after negative fund returns or increases in volatility). Download paper The Predominance of Real Estate in the Household PortfolioAuthors : Barras Laurent (McGill University - Desautels Faculty of Management); Betermier Sebastien (McGill University - Desautels Faculty of Management);Intervenant: Laurent Barras Discussant: Roméo Tédongap (ESSEC Business School) This paper investigates why household portfolios are heavily skewed toward real estate. Previous studies suggest that the large portfolio share of real estate primarily stems from non-investment-related motives as homeowners are often forced to invest heavily to buy the home they want to consume. In contrast, we show that homeowners would still invest the bulk of their wealth in real estate in a frictionless setting where they could own and consume separate amounts of housing. We provide empirical support to this argument and derive a dynamic portfolio model to study why real estate has such a strong investment appeal. Download paper Knowing Me, Knowing You? Similarity to the CEO and Fund Managers' Investment DecisionsAuthors : Jaspersen Stefan (University of Cologne - Centre for Financial Research (CFR)); Limbach Peter (University of Cologne and Centre for Financial Research (CFR));Intervenant: Stefan Jaspersen Discussant: David Le Bris (Toulouse Business School) We study whether investors’ demographic similarity to CEOs affects their investment decisions. Mutual fund managers are found to overweight firms led by CEOs who resemble them in terms of age, ethnicity and gender. This finding is robust to excluding educational and local ties and is supported by variation in similarity caused by CEO departures. Investing in firms run by similar CEOs, on average, is associated with superior performance and is more pronounced when uncertainty is higher. Results suggest that demographic similarity to CEOs facilitates informed trading. They further suggest that CEOs matter to investors. Download paper Is Variation on Valuation Too Excessive? A Study of Mutual Fund HoldingsAuthors : Chen Hsiu-Lang (University of Illinois at Chicago - Department of Finance);Intervenant: Hsiu-Lang Chen Discussant: Daniel Schmidt (HEC Paris) I first examine whether or not the fair value of financial instruments is priced consistently across mutual funds. Mutual funds price fair value differently for illiquid stocks, value stocks, and not-IPO-yet startups. I find that U.S. equity funds with an inclination for upbeat fair value tend to underperform others particularly in months following up-markets. When an equity fund performs poorly, has positive price dispersion in its holdings, or holds more illiquid stocks, the fund tends to have positive price dispersion again in the next quarter. This behavior is more significant when the stock market is more volatile. If the fair value of securities varies due to inconsistent valuation policies across mutual funds, a comparison of the portfolio weights on their securities could be problematic. I further present the economic impact of inconsistent fair value policies by U.S. equity funds. Download paper Testing the Tax-Loss Selling Explanation of the January Effect: Evidence from a 'Confiscatory' Tax Implemented in France in 1921Authors : Le Bris David (Toulouse Business School); Tobelem Sandrine (London School of Economics & Political Science (LSE));Intervenant: David Le Bris Discussant: Hsiu-Lang Chen (University of Illinois) Using 160 years of data, we document a significant January effect on the French equity Download paper |
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14:00 | Behavioral Finance 2 |
Behavioral Finance 2 (12/21/2017 at 14:00)Presiding : Zwetelina Iliewa (Centre for European Economic Research (ZEW))Pricing Sin Stocks: Ethical Preference vs. Risk AversionAuthors : Colonnello Stefano (Otto-von-Guericke Universitat Magdeburg); Curatola Giuliano (Goethe University Frankfurt - Research Center SAFE); Gioffre Alessandro (Goethe University Frankfurt - Research Center SAFE);Intervenant: Giuliano Curatola Discussant: Patrick Roger (Strasbourg University) We develop a model that explains the average return and volatility spread between sin stocks and non-sin comparable stocks. We endow agents' preferences with a sensitivity factor to firms' ethicalness. A positive marginal rate of substitution between dividends and ethicalness explains the higher average returns that sin stocks exhibit over non-sin comparable stocks. This result can be obtained either when (i) dividends and ethicalness are substitute goods and investors are less riskaverse than log utility, or (ii) when dividends and ethicalness are complementary goods and investors are more risk-averse than log utility. We empirically show that only the latter case can explain the patterns of the conditional return and volatility spreads between sin and non-sin comparable stocks. Download paper A Signaling Theory of Derivatives-Based HedgingAuthors : Anjos Fernando (NOVA School of Business and Economics); Winegar Adam (BI Norwegian Business School);Intervenant: Adam Winegar Discussant: Giuliano Curatola (Goethe University Frankfurt) We model a commodity producing firm that has private information about future Download paper Another Law of Small Numbers: Patterns of Trading Prices in Experimental MarketsAuthors : Bousselmi Wael (Université Montpellier I); Roger Patrick (Strasbourg University - LARGE Research Center - EM Strasbourg Business School); Roger Tristan (Université Paris-Dauphine, PSL Research University); Willinger Marc (LAMETA, University of Montpellier 1);Intervenant: Patrick Roger Discussant: Carol Osler (Brandeis University) Studies in neuropsychology show that the human brain processes small and large Download paper Dealer Trading at the FixAuthors : Osler Carol L. (Brandeis University - International Business School); Turnbull D. Alasdair S. (Clarkson University - School of Business);Intervenant: Carol Osler Discussant: Adam Winegar (BI Norwegian Business School) This paper develops a model of dealer conduct and misconduct at the London 4 pm fix, a major currency-market benchmark. The analysis clarifies the dealers' incentives and strategies, explains why price dynamics appear unchanged despite reforms, and provides insights relevant to benchmark design. Prices will be unusually volatile before the fix without collusion. Collusion is profitable because it shuts down a form of free-riding in which dealers front-run each other. With collusion the price trend accelerates more as the fix moment approaches than when dealers trade independently. Statistical tests detect this shift around 2008, when major banks admit their dealers began colluding. Download paper |
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14:00 | Corporate Governance 2 |
Corporate Governance 2 (12/21/2017 at 14:00)Presiding : Edith Ginglinger (Université Paris Dauphine)Peer Pressure in Corporate Earnings ManagementAuthors : Charles Constantin (University of Southern California - Marshall School of Business); Schmid Markus M. (University of Saint Gallen - Swiss Institute of Banking and Finance); von Meyerinck Felix (University of Saint Gallen - School of Finance);Intervenant: Constantin Charles Discussant: Ryan Williams (University of Arizona) We show that peer firms play an important role in shaping corporate earnings management decisions. To overcome identification issues in isolating peer effects, we use fund flow-induced selling pressure by passive open-end equity mutual funds as exogenous shocks to firms' stock prices. Managers respond to such exogenous price shocks by adjusting earnings management policies. We then measure individual firms' reactions to changes in earnings management at peer firms as a result of such exogenous price shocks. The documented peer effect in earnings management is not only statistically, but also economically significant. Our results are robust to alternative measures of fund flow-induced selling pressure and earnings management, and to estimating instrumental variables regressions in which we instrument peer firms' earnings management with mutual fund flow-induced selling pressure. Download paper Active Versus Speculative Monitoring: Evidence from Pre-WWI Paris-Listed FirmsAuthors : Bonhoure Emilie (Toulouse Business School); Germain Laurent (Toulouse University, Toulouse Business School); Le Bris David (Toulouse Business School);Intervenant: Emilie Bonhoure Discussant: Lea Henny Stern (University of Washington) The corporate statutes of the five hundred firms listed on the unofficial Paris market before WWI stated the amount of dividends as a fixed percentage of profits: as a result, managers could not use dividends as a market signal. This setting offers the opportunity to study the agency explanation of dividends, while clearly excluding the signaling theory. Moreover, we investigate speculative (active) monitoring costs as proxied by distance between investors and the company's main activities (or head office). We confirm the effect of agency costs and find that speculative monitoring costs are more important in explaining dividend yield. Download paper A Learning-Based Approach to Evaluating Boards of DirectorsAuthors : Stern Lea Henny (University of Washington - Foster School of Business);Intervenant: Lea Henny Stern Discussant: Sumingyue Wang (ESSEC Business School) Using predictions from a learning model, this paper exploits the cross-sectional variation in the learning-induced decline in stock return volatility over director tenure to infer the marginal value of different kinds of directors. This new framework confirms prior empirical findings and documents new results. For example, directors joining better compensated boards have higher marginal value while the marginal value of a director joining an entrenched board is muted. Furthermore, the estimates imply that governance related uncertainty associated with the arrival of a new director accounts for 7% of return volatility, shedding light on the extent to which governance matters. Download paper Are Independent Directors with Industry Expertise More Informed?Authors : Wang Sumingyue (ESSEC Business School - Finance Department, Students);Intervenant: Sumingyue Wang Discussant: Sara Ain Tommar (Université Paris IX - Dauphine) This paper examines the informational advantage of independent directors with industry expertise compared to independent directors without such expertise. I find that independent directors with industry expertise earn significantly higher trading returns when purchasing their firms’ stocks than do independent directors without industry expertise. The impact of industry expertise on independent directors’ trading profits is more pronounced for firms with higher information asymmetry, for more complex firms, and for firms with higher business risk. Trades made by independent directors with industry expertise have greater predictive power regarding future stock price changes. Moreover, an increase in the proportion of independent directors with relevant industry expertise on the board is associated with better alliance performance, a higher probability of M&A deal completion, and a lower investment-to-price sensitivity. Overall, the results suggest that independent directors with industry expertise have superior knowledge about the firm and enhance board effectiveness in performing both monitoring and advisory roles. Download paper |
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14:00 | Financial Econometrics & Mathematics |
Financial Econometrics & Mathematics (12/21/2017 at 14:00)Presiding : Yannick Malevergne (Université Paris I - Panthéon Assas)What Drives the Trend and Behavior in Aggregate (Idiosyncratic) Variance? Follow the Bid-Ask BounceAuthors : Lesmond David A. (Tulane University - A.B. Freeman School of Business); Pan Xuhui (Nick) (Tulane University); Zhao Yihua (Tulane University - A.B. Freeman School of Business);Intervenant: David Lesmond Discussant: Jeroen Rombouts (ESSEC Business School) A number of competing explanations have been offered as a rationale for the trend in idiosyncratic variance that has been experienced over the past four decades. We establish a theoretical model linking a market microstructure bias with the industry-adjusted idiosyncratic variance (Campbell, Lettau, Malkiel, and Xu, 2001) or the risk-adjusted idiosyncratic variance. Using this model's predictions, we empirically show that the bid-ask spread eliminates the time trend in aggregate idiosyncratic variance. These results are robust across various exchanges, across various risk-based measures of idiosyncratic variance, and through time. Two natural experiments demonstrate that an exogenous shock to the bid-ask spread is associated with a subsequent decline in the aggregate idiosyncratic variance. The microstructure hypothesis dominates any of the alternative explanations, including uncertainty about profitability, earnings shocks, or growth options, for the trend in idiosyncratic variance. Download paper The Dynamics of Price Jumps in the Stock Market: An Empirical Study on Europe and U.S.Authors : Ferriani Fabrizio (Bank of Italy); Zoi Patrick (Bank of Italy);Intervenant: Fabrizio Ferriani Discussant: Gustavo Schwenkler (Boston University) We study the bivariate jump process involving the S&P 500 and the Euro Stoxx 50 with Download paper Variance Swap Payoffs, Risk Premia and Extreme Market ConditionsAuthors : Rombouts Jeroen (ESSEC Business School); Stentoft Lars (Department of Economics, University of Western Ontario); Violante Francesco (Maastricht University - Department of Economics);Intervenant: Jeroen Rombouts Discussant: Fabrizio Ferriani (Bank of Italy) This paper estimates the Variance Risk Premium (VRP) directly from synthetic variance swap payoffs. Since variance swap payoffs are highly volatile, we extract the VRP by using signal extraction techniques based on a state-space representation of our model in combination with a simple economic constraint. Our approach, only requiring option implied volatilities and daily returns for the underlying, provides measurement error free estimates of the part of the VRP related to normal market conditions, and allows constructing variables indicating agents' expectations under extreme market conditions. The latter variables and the VRP generate different return predictability on the major US indices. A factor model is proposed to extract a market VRP which turns out to be priced when considering Fama and French portfolios. Download paper Efficient Parameter Estimation for Multivariate Jump-DiffusionsAuthors : Guay Francois (Boston University); Schwenkler Gustavo (Boston University - Department of Finance & Economics);Intervenant: Gustavo Schwenkler Discussant: David Lesmond (Tulane University) This paper develops estimators of the transition density, filters, and parameters Download paper |
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14:00 | Interest Rates |
Interest Rates (12/21/2017 at 14:00)Presiding : Patrice Poncet (ESSEC Business School)International Real YieldsAuthors : Ermolov Andrey (Fordham University - Gabelli School of Business);Intervenant: Andrey Ermolov Discussant: Paul Whelan (Copenhagen Business School) I study market-implied real yields extracted from prices of inflation-linked government bonds for nine developed countries. The liquidity premium is an important component of breakeven inflation rates. Unconditional real yield curves are upward-sloping, providing empirical support for habit models. The cross-country real rate equality is rejected. Across countries, real yields are strongly positively correlated while liquidity premia are moderately positively correlated. Low nominal yields following the Great Recession are mainly due to low real yields, although the inflation risk premia have also decreased. Download paper Expectations or Surprises: What Really Moves the U.S. Treasury Market?Authors : van der Wel Michel (Erasmus University Rotterdam); Erdemlioglu Deniz (IESEG School of Management and CNRS - France);Intervenant: Deniz Erdemlioglu Discussant: Alberto Plazzi (USI-Lugano) The standard approach in asset pricing is to use information shocks to determine how markets react to news. We examine this paradigm empirically by decomposing high-frequency bond responses into ex-ante (expected) and ex-post (surprise) news components. Our analysis shows that the magnitude, direction and duration of reactions depend on the choice of measurement component. While bond returns barely react to news, volatility is closely linked to fundamentals. Ex-ante forecasts of investors generate significant jump (tail) clustering in the data, but we find no evidence for such effects with (ex-post) surprise measures. This suggests that considering ex-post surprises solely as proxy for shocks undermines the realized announcement impact, particularly for characterizing jump-type tail behavior in crisis periods. The news-implied reaction dispersion between expectations and shocks is sizable, related to trading volume and time-varying over the business cycle. Our findings provide relevant implications for macro-finance modeling and bond market microstructure. Download paper Does Monetary Policy Impact Market Integration? Evidence from Developed and Emerging MarketsAuthors : Caporin Massimiliano (University of Padua - Department of Statistical Sciences); Pelizzon Loriana (Goethe University Frankfurt - Faculty of Economics and Business Administration); Plazzi Alberto (USI-Lugano);Intervenant: Alberto Plazzi Discussant: Andrey Ermolov (Fordham University) We investigate the impact of monetary announcements of the ECB and the FED on integration in the equity and sovereign CDS markets for a large cross-section of 18 Developed and 21 Emerging countries over 2006 to 2015. The effect of both announcements is negative or muted in the pre-crisis period, while it turns strongly positive during the financial crisis of 2007-2009. ECB interventions lead to more integration in the equity market during 2010 to 2012, but dis-integration in the CDS market in the ECB Quantitative Easing period (2013 to 2015), especially for emerging countries. In contrast, FED announcements are perceived as global factors in the CDS emerging market and are accompanied with an increase in integration both when the FED implements and unwinds its unconventional measures. The relation between the global factor and the U.S. market increases during FED interventions, the same does hold for the European market during ECB announcements. The exposure of emerging markets to outside monetary policy shocks can be explained in terms of their degree of trade and financial openness. Download paper Central Bank Communication and the Yield CurveAuthors : Leombroni Matteo (Stanford University); Vedolin Andrea (Boston University - Department of Finance & Economics); Venter Gyuri (Copenhagen Business School); Whelan Paul (Copenhagen Business School);Intervenant: Paul Whelan Discussant: Deniz Erdemliglu (IESEG School of Management and CNRS) We decompose ECB monetary policy surprises into target and communication shocks and document a number of novel findings. First, consistent with the idea that concurrent implementation of monetary policy is largely anticipated, we find that target shocks only have a limited effect on yields. However, we show that communication shocks have a large and economically significant impact on swap rates and sovereign yields, displaying a hump-shaped pattern across maturity. Second, we document that around the European debt crisis communication had the effect of driving a wedge between yields on core versus peripheral countries. We study two explanations for this finding, revelation of the ECB's private information and credit risk, and argue that neither channel can explain the effect on yield spreads. Motivated by this, we consider an alternative explanation in which central bank communication can induce demand shocks for bonds due to the presence of reaching-for-yield investors. We show that a resulting risk premium channel helps to rationalize our findings. Download paper |
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14:00 | Market Microstructure 2 |
Market Microstructure 2 (12/21/2017 at 14:00)Presiding : Laurence Lescourret (ESSEC Business School)How Auctions Amplify House-Price FluctuationsAuthors : Arefeva Alina (Johns Hopkins University - Carey Business School);Intervenant: Alina Arefeva Discussant: Ioanid Rosu (HEC Paris) I develop a dynamic search model of the housing market where house prices are determined in auctions rather than by Nash bargaining as in the housing search model from the literature. The model with auctions generates fluctuations between booms and busts. During the boom multiple buyers compete for one house, while in the bust buyers are choosing among several houses. The model improves on the performance of the model with Nash bargaining by producing highly volatile house prices which helps to solve the puzzle of excess volatility of house prices. Higher volatility arises because of the competition between buyers with heterogeneous values. With heterogeneous valuations, the price determinations becomes important for the quantitative properties of the model. With Nash bargaining, the buyer is chosen randomly among all interested buyers. Then the average of buyers' house values determines the house price. In the auction model, the buyer is chosen by the maximum bid among all interested buyers, so the highest value determines the house prices. During the boom, the highest values increase more than the average values, making the sales price more volatile. This high volatility is constrained efficient since the equilibrium in the model decentralizes the solution of the social planner problem, constrained by the search frictions. Download paper Shock Propagation Through Cross-Learning in Opaque NetworksAuthors : Schneemeier Jan (Indiana University - Kelley School of Business);Intervenant: Jan Schneemeier Discussant: Jun Uno (Waseda University) This paper shows that cross-learning from other firms’ stock prices leads to the propagation of unrelated Download paper Quotes, Trades and the Cost of CapitalAuthors : Rosu Ioanid (HEC Paris (Groupe HEC) - Finance Department); Sojli Elvira (UNSW Business School, School of Banking and Finance); Tham Wing Wah (University of New South Wales (UNSW));Intervenant: Ioanid Rosu Discussant: Jan Schneemeier (Indiana University) We study the quoting activity of market makers in relation with trading, liquidity, Download paper Scarcity and Spotlight Effects on Term Structure: Quantitative Easing in JapanAuthors : Pelizzon Loriana (Goethe University Frankfurt - Faculty of Economics and Business Administration); Subrahmanyam Marti G. (New York University - Stern School of Business); Tobe Reiko (Waseda University - Graduate School of Finance, Accounting & Law); Uno Jun (Waseda University);Intervenant: Jun Uno Discussant: Alina Arefeva (Johns Hopkins University) We investigate the determinants of the term structures of bond yield and market liquidity Download paper |
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16:00 | Coffee break |
Coffee break (12/21/2017 at 16:00) |
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16:30 | Banking 3 |
Banking 3 (12/21/2017 at 16:30)Presiding : Joël Petey (Université de Strasbourg)The Relevance of Credit Ratings in Transparent Bond MarketsAuthors : Badoer Dominique C. (University of Missouri at Columbia - Department of Finance); Demiroglu Cem (Koc University, College of Administrative Sciences and Economics);Intervenant: Dominique Badoer Discussant: Narayan Bulusu (Bank of Canada) We examine the effect of bond price transparency on the information content of credit ratings. To identify the causal impact of transparency, we use a recent regulation in the U.S. that mandates real-time public dissemination (or disclosure) of over-the-counter transactions in corporate debt securities via the Trade Reporting and Compliance Engine (TRACE). We find that dissemination dramatically reduces the average short-term stock and bond price impact of rating downgrades, suggesting that ratings fill information gaps arising from lack of price transparency. The reduction does not arise from changes in investor confidence in, or the ex post quality of, issuer-paid ratings. Dissemination matters less where the issuer is a CDS reference entity or has outstanding bonds traded on an exchange or where stock analysts issue more reliable forecasts of the issuer's future earnings. We also find that rating downgrades become more sensitive to changes in market-based measures of credit risk after dissemination, consistent with transparent prices making rating inflation more transparent, and therefore increasing the incentives for rating agencies to update ratings in a more timely manner. Finally, we document that credit spreads better predict future defaults after dissemination, consistent with more efficient information aggregation in transparent markets. Download paper The Value of Bond Underwriter RelationshipsAuthors : Daetz Stine Louise (Copenhagen Business School); Dick-Nielsen Jens (Copenhagen Business School - Department of Finance); Nielsen Mads Stenbo (Copenhagen Business School - Department of Finance);Intervenant: Stine Daetz Discussant: Dominique Badoer (University of Missouri) We show that corporate bond issuers benefit from utilizing existing underwriter relationships when rolling over bonds, but at the same time become exposed to underwriter distress. A strong relationship enables the underwriter to credibly certify the issuer resulting in lower direct issuance costs and lower underpricing. However, if the underwriter becomes distressed, this spills over to the issuer's credit risk, because it weakens the relationship and increases the risk of involuntary relationship termination. The credit risk spillover is more pronounced for risky, opaque issuers with high rollover exposure, i.e., those issuers most in need of certification by an underwriter. Download paper What Drives Interbank Loans? Evidence from CanadaAuthors : Bulusu Narayan (Bank of Canada); Guerin Pierre (OECD);Intervenant: Narayan Bulusu Discussant: Stine Daetz (Copenhagen Business School) We analyse the drivers of the Canadian interbank market using a novel dataset of uncollateralised and collateralised overnight loans, and applying a Bayesian model averaging approach to deal with model uncertainty. We find three important classes of drivers of the terms of interbank loans: (i) the price of substitutes, (ii) financial stress, and (iii) systemic liquidity needs. These drivers have a heterogeneous impact on interbank loans, depending on the collateral quality. We then present the results of a structural VAR analysis, which shows a persistent impact of financial stress and systemic liquidity shocks on the overnight interbank funding market. Download paper |
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16:30 | Capital Structure |
Capital Structure (12/21/2017 at 16:30)Presiding : Elisa Luciano (University of Torino)Renegotiation Costs, Financial Contracting, and Lender ChoiceAuthors : Ferracuti Elia (University of Utah - School of Accounting and Information Systems); Morris Arthur (University of Utah - School of Accounting and Information Systems);Intervenant: Elia Ferracuti Discussant: Sujiao Zhao (Banco de Portugal) This study presents evidence consistent with incomplete contracting theory in the relation- Download paper Information Dynamics and Debt MaturityAuthors : Geelen Thomas (Ecole Polytechnique Fédérale de Lausanne);Intervenant: Thomas Geelen Discussant: Elia Ferracuti (University of Utah) I develop a dynamic model of financing decisions and optimal debt maturity choice Download paper Investor Relations and IPO PerformanceAuthors : Chahine Salim (American University of Beirut - Olayan School of Business); Colak Gonul (Hanken School of Economics); Hasan Iftekhar (Gabelli School of Business, Fordham University); Mazboudi Mohamad (American University of Beirut);Intervenant: Gonul Colak Discussant: Thomas Geelen (Ecole Polytechnique Fédérale de Lausanne) We analyze the value of investor relations (IR) strategies to IPO firms. Firms that are less Download paper |
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16:30 | Derivatives |
Derivatives (12/21/2017 at 16:30)Presiding : Franck Moraux (Université de Rennes 1)Term Structure of Interest Rates with Short-Run and Long-Run RisksAuthors : Grishchenko Olesya V. (Board of Governors of the Federal Reserve System); Song Zhaogang (Johns Hopkins University - Carey Business School); Zhou Hao (Tsinghua University - PBC School of Finance);Intervenant: Olesya Grishchenko Discussant: Ilya Dergunov (Goethe University Frankfurt) Interest rate variance risk premium (IRVRP), the difference between implied and realized variances of interest rates, emerges as a strong predictor of Treasury bond returns of maturities ranging between one and ten years for return horizons up to six months. IRVRP is not subsumed by other predictors such as forward rate spread or equity variance risk premium. These results are robust in a number of dimensions. We rationalize our findings within a consumption-based model with long-run risk, economic uncertainty, and inflation non-neutrality. In the model interest rate variance risk premium is related to short-run risk only, while standard forward-rate-based factors are associated with both short-run and long-run risks in the economy. Our model qualitatively replicates the predictability pattern of IRVRP for bond returns. Download paper Option Implied DividendsAuthors : Kragt Jac (Tilburg University - Department of Finance);Intervenant: Jac Kragt Discussant: Olesya Grishchenko (Board of Governors of the Federal Reserve System) I determine the valuation of future dividends for US companies as implied by option prices. This is the first paper in which the early exercise premium included in these prices is explicitly accounted for as part of finding these dividend valuations. From these implied dividend data, I build company-specific term structures of dividend growth relative to actual dividends. These term structures show substantial variation in slope over time as well as in the cross-section. Implied dividends predict actual dividends, particularly upward dividend changes. But if a dividend cut is correctly predicted by implied dividends, the average 2.3% stock price response to the announcement becomes negligible. Download paper Extreme Inflation and Time-Varying Disaster RiskAuthors : Dergunov Ilya (Goethe University Frankfurt - Research Center SAF); Meinerding Christoph (Deutsche Bundesbank); Schlag Christian (Goethe University Frankfurt - Research Center SAFE);Intervenant: Ilya Dergunov Discussant: Jac Kragt (Tilburg University) Low consumption growth tends to occur together with either very high or very low inflation. The probability of low expected consumption growth estimated from a Markov chain for consumption growth and inflation is highly correlated with a measure for the likelihood of consumption disasters suggested by Wachter (2013). A simple asset pricing model with recursive utility and unobservable states reproduces the time variation in volatilities and correlations of stock and bond returns very well. Download paper |
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16:30 | M&A / Private Equity (sponsored by ARDIAN) |
M&A / Private Equity (sponsored by ARDIAN) (12/21/2017 at 16:30)Presiding : Nihat Aktas (WHU Otto Beisheim School of Management)Weak Credit CovenantsAuthors : Ivashina Victoria (Harvard University); Vallee Boris (Harvard Business School - Finance Unit);Intervenant: Boris Vallee Discussant: Ettore Croci (Catholic University of the Sacred Hearth of Milan) Using novel data on 1,240 credit agreements for large corporate loans, we show that while inclusion of negative covenants that restrict new debt issuance, payments, asset sales, affiliate transactions and investments is widespread, clauses that weaken these restrictions are almost as common. We measure the deductions for the core covenants in terms of their potential impact on overall leverage and show that they are large, and concentrated in already highly levered transactions. We analyze the cross-sectional variation in contractual weaknesses introduced through deductions and exclusions to negative covenants and show that such contractual provisions are characteristic of leveraged buyouts. Download paper Takeover Duration and Negotiation ProcessAuthors : Calcagno Riccardo (EMLYON Business School); de Bodt Eric (Université de Lille); Demidova Irina (Ecole des sciences de la gestion - Université du Québec à Montréal);Intervenant: Irina Demidova Discussant: Guosong Xu (WHU Otto Beisheim School of Management) We study the determinants of the takeover processes duration. Risk averse bidders submit bids to targets. Targets either accept, and the transaction is completed, or negotiate one more period. As time goes on, bidders and targets learn about true synergies thanks to the due diligence process. But rival bidders can show up and compete to acquire targets, a desirable event from targets point of view, but costly for bidders. Our simulations characterize the relation between negotiation duration, pressure of potential competition and the learning process. Our empirical exercise is based on a large sample of merger negotiations identified through the manual examination of SEC filings. We use the simulated method of moments to match the frequency distribution of private negotiation duration in a calibration exercise. Our results show that a 10% ex-ante probability of new bidders entering in the M&A process each month is consistent with the data. Download paper Facilitating Takeovers and Takeover Premia: The Case of Coordinated MonitoringAuthors : Croci Ettore (Catholic University of the Sacred Heart of Milan); Mazur Mieszko (Catholic University of Lille - IESEG School of Management); Salganik-Shoshan Galla (Ben-Gurion University of the Negev);Intervenant: Mieszko Mazur Discussant: Stefan Jaspersen (University of Cologne) This paper shows that coordinated monitoring by institutional investors affect how firms behave Download paper |
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18:00 | Cocktail & Awards |
Cocktail & Awards (12/21/2017 at 18:00) |
- Alhashel Bader (Kuwait University)
- Alnahedh Saad (University of Colorado at Boulder - Department of Finance)
- Ammann Manuel (University of Saint Gallen - School of Finance)
- Andrei Daniel (University of California, Los Angeles (UCLA) - Anderson School of Management)
- Anjos Fernando (NOVA School of Business and Economics)
- Arefeva Alina (Johns Hopkins University - Carey Business School)
- Arnold Marc (University of Saint Gallen - School of Finance)
- Badoer Dominique C. (University of Missouri at Columbia - Department of Finance)
- Barbosa Luciana (Bank of Portugal - Economic Research Department)
- Barras Laurent (McGill University - Desautels Faculty of Management)
- Barroso Pedro (UNSW Australia Business School, School of Banking and Finance)
- Betermier Sebastien (McGill University - Desautels Faculty of Management)
- Betzer André (BUW- Schumpeter School of Business and Economics)
- Bilan Andrada (Swiss Finance Institute)
- Bonhoure Emilie (Toulouse Business School)
- Boons Martijn (New University of Lisbon - Nova School of Business and Economics)
- Bousselmi Wael (Université Montpellier I)
- Boussetta Selma (University of Toulouse 1 - Université Toulouse 1 Capitole)
- Branger Nicole (University of Muenster - Finance Center Muenster)
- Bulusu Narayan (Bank of Canada)
- Calcagno Riccardo (EMLYON Business School)
- Caporin Massimiliano (University of Padua - Department of Statistical Sciences)
- Celerier Claire (University of Toronto - Rotman School of Management)
- Chahine Salim (American University of Beirut - Olayan School of Business)
- Charles Constantin (University of Southern California - Marshall School of Business)
- Chen Hsiu-Lang (University of Illinois at Chicago - Department of Finance)
- Cimon David A. (Bank of Canada)
- Colak Gonul (Hanken School of Economics)
- Colonnello Stefano (Otto-von-Guericke Universitat Magdeburg)
- Croci Ettore (Catholic University of the Sacred Heart of Milan)
- Cujean Julien (University of Maryland - Robert H. Smith School of Business)
- Curatola Giuliano (Goethe University Frankfurt - Research Center SAFE)
- Daetz Stine Louise (Copenhagen Business School)
- Daniel Kent D. (Columbia Business School - Finance and Economics)
- Dass Nishant (Georgia Institute of Technology - Scheller College of Business)
- Deloof Marc (University of Antwerp)
- Demidova Irina (Ecole des sciences de la gestion - Université du Québec à Montréal)
- Demiroglu Cem (Koc University, College of Administrative Sciences and Economics)
- Dergunov Ilya (Goethe University Frankfurt - Research Center SAF)
- Dick-Nielsen Jens (Copenhagen Business School - Department of Finance)
- Doh Hyunsoo (Nanyang Technological University)
- Erdemlioglu Deniz (IESEG School of Management and CNRS - France)
- Ermolov Andrey (Fordham University - Gabelli School of Business)
- Ferracuti Elia (University of Utah - School of Accounting and Information Systems)
- Ferriani Fabrizio (Bank of Italy)
- Flore Raphael (University of Cologne - Center for Macroeconomic Research (CMR))
- Garriott Corey (Bank of Canada)
- Geelen Thomas (Ecole Polytechnique Fédérale de Lausanne)
- Germain Laurent (Toulouse University, Toulouse Business School)
- Gioffre Alessandro (Goethe University Frankfurt - Research Center SAFE)
- Gloßner Simon (Catholic University of Eichstaett-Ingolstadt)
- Grishchenko Olesya V. (Board of Governors of the Federal Reserve System)
- Guay Francois (Boston University)
- Guerin Pierre (OECD)
- Hasan Iftekhar (Gabelli School of Business, Fordham University)
- Hoffmann Arvid O. I. (University of Adelaide - Business School)
- Huelsbusch Hendrik (University of Muenster - Finance Center Muenster)
- Iliewa Zwetelina (Centre for European Economic Research (ZEW))
- Ivashina Victoria (Harvard University)
- Jaroszek Lena (Copenhagen Business School - Department of Finance)
- Jaspersen Stefan (University of Cologne - Centre for Financial Research (CFR))
- Kaeck Andreas (University of Sussex)
- Karehnke Paul (UNSW Australia Business School, School of Banking and Finance)
- Klos Alexander (University of Kiel - Institute for Quantitative Business and Economics Research (QBER))
- Kraftschik Alexander (University of Muenster - Finance Center Muenster)
- Kragt Jac (Tilburg University - Department of Finance)
- Landoni Mattia (Southern Methodist University (SMU) - Finance Department)
- Le Bris David (Toulouse Business School)
- Leombroni Matteo (Stanford University)
- Lescourret Laurence (ESSEC Business School)
- Lesmond David A. (Tulane University - A.B. Freeman School of Business)
- Limbach Peter (University of Cologne and Centre for Financial Research (CFR))
- Lunghi Sandro (Inalytics Limited)
- Marfè Roberto (University of Torino - Collegio Carlo Alberto)
- Martin Thorsten (HEC Paris - Finance Department)
- Mazboudi Mohamad (American University of Beirut)
- Mazur Mieszko (Catholic University of Lille - IESEG School of Management)
- Meinerding Christoph (Deutsche Bundesbank)
- Moinas Sophie (Toulouse School of Economics)
- Montalto Fabiola (University of Antwerp)
- Morris Arthur (University of Utah - School of Accounting and Information Systems)
- Nanda Vikram K. (University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics)
- Nielsen Mads Stenbo (Copenhagen Business School - Department of Finance)
- Osler Carol L. (Brandeis University - International Business School)
- Otto Clemens A. (Singapore Management University)
- Ovtchinnikov Alexei V. (HEC Paris (Groupe HEC) - Finance Department)
- Pan Xuhui (Nick) (Tulane University)
- Pelizzon Loriana (Goethe University Frankfurt - Faculty of Economics and Business Administration)
- Plazzi Alberto (USI-Lugano)
- Pénasse Julien (University of Luxembourg)
- Roger Patrick (Strasbourg University - LARGE Research Center - EM Strasbourg Business School)
- Roger Tristan (Université Paris-Dauphine, PSL Research University)
- Rombouts Jeroen (ESSEC Business School)
- Rosu Ioanid (HEC Paris (Groupe HEC) - Finance Department)
- Rottke Simon (University of Muenster - Finance Center Muenster)
- Salganik-Shoshan Galla (Ben-Gurion University of the Negev)
- Schiller Christoph M. (University of Toronto - Rotman School of Management)
- Schlag Christian (Goethe University Frankfurt - Research Center SAFE)
- Schmid Markus M. (University of Saint Gallen - Swiss Institute of Banking and Finance)
- Schmidt Daniel (HEC Paris (Groupe HEC) - Finance Department)
- Schneemeier Jan (Indiana University - Kelley School of Business)
- Schwenkler Gustavo (Boston University - Department of Finance & Economics)
- Seeger Norman (VU University Amsterdam)
- Sojli Elvira (UNSW Business School, School of Banking and Finance)
- Song Zhaogang (Johns Hopkins University - Carey Business School)
- Stentoft Lars (Department of Economics, University of Western Ontario)
- Stern Lea Henny (University of Washington - Foster School of Business)
- Straumann Simon (University of Saint Gallen - School of Finance)
- Subrahmanyam Marti G. (New York University - Stern School of Business)
- Tham Wing Wah (University of New South Wales (UNSW))
- Theissen Erik (University of Mannheim - Finance Area)
- Tobe Reiko (Waseda University - Graduate School of Finance, Accounting & Law)
- Tobelem Sandrine (London School of Economics & Political Science (LSE))
- Turnbull D. Alasdair S. (Clarkson University - School of Business)
- Uno Jun (Waseda University)
- Vallee Boris (Harvard Business School - Finance Unit)
- Valta Philip (University of Bern)
- Vedolin Andrea (Boston University - Department of Finance & Economics)
- Venter Gyuri (Copenhagen Business School)
- Violante Francesco (Maastricht University - Department of Economics)
- Vogel Sebastian (Ecole Polytechnique Fédérale de Lausanne)
- Volkmann Christine (University of Wuppertal)
- Wang Sumingyue (ESSEC Business School - Finance Department, Students)
- Watugala Sumudu W. (Cornell University - Dyson School of Applied Economics and Management)
- Whelan Paul (Copenhagen Business School)
- Willinger Marc (LAMETA, University of Montpellier 1)
- Wilson Mungo Ivor (University of Oxford - Said Business School)
- Winegar Adam (BI Norwegian Business School)
- Xiao Steven Chong (University of Texas at Dallas - Naveen Jindal School of Management)
- Zeldes Stephen P. (Columbia Business School - Finance and Economics)
- Zhao Yihua (Tulane University - A.B. Freeman School of Business)
- Zhou Hao (Tsinghua University - PBC School of Finance)
- Zoi Patrick (Bank of Italy)
- de Bodt Eric (Université de Lille)
- van Kervel Vincent (Pontifical Catholic University of Chile)
- van den Bongard Inga (University of Mannheim - Finance Area)
- van der Wel Michel (Erasmus University Rotterdam)
- von Beschwitz Bastian (Board of Governors of the Federal Reserve System)
- von Meyerinck Felix (University of Saint Gallen - School of Finance)
Awards
- In 2016, the prize was awarded to:
- Matthew DARST & Ehraz REFAYET for the paper entitled "Credit Default Swaps in General Equilibrium:
Spillovers, Credit Spreads, and Endogenous Default".
- Matthew DARST & Ehraz REFAYET for the paper entitled "Credit Default Swaps in General Equilibrium:
- In 2015, the prize was awarded to:
- Roberto MARFE for the paper entitled "Labor Rigidity and the Dynamics of the Value Premium"
- Roberto MARFE for the paper entitled "Labor Rigidity and the Dynamics of the Value Premium"
- In 2014, the prizes were awarded to:
- Corporate finance: Taylor BEGLEY for the paper entitled "The Real Costs of Corporate Credit Ratings"
- Financial markets: Shiyang HUANG for the paper entitled "The Effect of Options on Information Acquisition and Asset Pricing"
- In 2013, the prizes were awarded to:
- Corporate finance: Clemens OTTO & Paolo VOLPIN for the paper entitled "Marking to Market and Inefficient Investment Décisions"
- Financial markets: Matthias EFING & Harald HAU for the paper entitled "Structured Debt Ratings: Evidence on Conflicts of Interest"
- High frequency data / Microstructure: Bart YUESHEN for the paper entitled "Queuing Uncertainty"
Registrations
To register, please visit SSRN website.
Registration fees: 250€
For any question about your registration, you can contact the organizing committee : conference2017@paris-december.eu
Information
The Paris December 2017 Finance Meeting will be held on December 21, 2017 at the Novotel Paris les Halles hotel in the heart of historical Paris.
Location
Novotel Paris Les Halles Hotel
Place Marguerite de Navarre
75001 PARIS
Special rate for participants
After your registration, if you want to get a special rate at the Novotel Paris les Halles hotel, please contact the organizing committee : conference2017@paris-december.eu.
Access
Metro station: "Châtelet"
Lines 1, 7 and 11: exit "Place Ste Opportune"
Line 4: exit "Rue de la Lingerie"
Line 14: exit "n°10"
RER station: "Châtelet-les-Halles"
Lines A, B and D : exit "Forum des Halles" then follow the exit "Porte Berger"