VFN-L June 2006

vfn-l@fam.tuwien.ac.at

3 participants
8 discussions

[VFN] VGSF Research Seminar by Li Jin (Harvard Business School) on Friday, June 30th
by Michael Halling 24 Jun '06

24 Jun '06

Prof. Li Jin from the Harvard Business School is giving a VGSF research seminar on "Managerial Career Concern and Mutual Fund Short-termism" on FRIDAY, June 30th, from 15:30 to 17:00 at the Institute for Advanced Studies (Institut für Höhere Studien, Stumpergasse 56, 1060 Wien), Lecture Room (HS) 2. Please find the paper's abstract below. Coffee and snacks are going to be available in the cafeteria of IHS, which is located next to the lecture room, before and after the seminar. Li is going to be in Vienna for the entire week. If you like to meet him and to discuss your research with him, please contact me. Best, Michael Halling Abstract Mutual fund investors reward short run performance with large inflows. Fund managers facing strong performance-related flows are shown to focus more on short horizon investments. Further tests of causality suggest that fund managers short investment horizons are caused by their investors short horizons, but not the other way around.

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[VFN] Reminder Invitation June 29th: Public Lecture with Prof. Ananth Madhavan "Transaction Cost Modeling as a Source of Alpha"
by Gutmann Center-D.Grimm 23 Jun '06

23 Jun '06

GUTMANN CENTER FOR PORTFOLIO MANAGEMENT at the University of Vienna - http//:www.gutmann-center.at invites to the following PUBLIC LECTURE: (Apologies for any cross-listings!): Date: June 29th, 2006 - 4.00 p.m. Location: Bank Gutmann AG, Schwarzenbergplatz 16, 1010 Wien Speaker: Prof. Dr. Ananth MADHAVAN, Barclays Global Investors (BGI) Title: TRANSACTION COST MODELING AS A SOURCE OF ALPHA Abstract The impact of realized transaction costs on portfolio performance is now well recognized. Less well understood, however, is the effect of transaction cost on performance in the pre-trade dimension. Intuitively, transaction costs affects performance through the choice of bets the manager undertakes (breadth), the frequency of bets (turnover), and the size of those bets (order size). We show that transaction cost modeling is a source of alpha, increasing skill and breadth. Specifically, accurate transaction cost models allow managers to make better decisions regarding which securities should or should not be traded, and the optimal size of the trade. Further, improved forecasts of costs are critical to determining optimal portfolio turnover. Greater turnover allows for more active bets, increasing breadth, but magnifies the impact of trading costs. Balancing these considerations appropriately yields an optimal turnover level. Transaction cost models thus help reduce not only realized costs, but also improve performance on an ex ante basis. The analysis provides insights into the determinants of optimal fund capacity. We show that capacity problems are manifested gradually in the form of higher expected costs, reduced breadth, and lower turnover. Capacity is an elastic concept that is surprisingly responsive to even relatively modest gains in transaction cost control or forecasting ability. This suggests that fund managers can influence their capacity through investments in better execution research and technology. About Ananth Madhavan: Ananth Madhavan is the Global Head of Trading Research at BGI. He leads BGI's global trading research team with a focus on execution research and trading strategies across different asset classes worldwide. Prof. Madhavan also works closely with the global trading team and BGI’s alpha research and product groups to design and implement trading strategies capturing liquidity-driven market opportunities. Before joining BGI in 2003, Prof. Madhavan was Managing Director of Research of ITG, Inc. and a member of the firm’s management and executive committees. Previously, he was the Charles B. Thorton Professor of Finance at the Marshall School of Business at the University of Southern California, and Assistant Professor of Finance at the Wharton School of the University of Pennsylvania. Ananth Madhavan is the author of numerous publications in leading academic and practitioner journals. He received his PhD in Economics from Cornell University and BA from the University of Delhi, India. Please REGISTER: Mail: gutmann.bwl(a)univie.ac.at Phone: +43-1-4277-38186 - Fax: +43-1-4277-38074 Contact and further information: Gutmann Center for Portfolio Management University of Vienna - Mag. Dorothea GRIMM Bruenner Str. 72 - 1210 Wien (Austria) phone: +43-1-4277-38186 - fax: +43-1-4277-38074 mail: gutmann.bwl(a)univie.ac.at - web: www.gutmann-center.at

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[VFN] 21. Austrian Working Group on Banking and Finance
by Alexander Brauneis 21 Jun '06

21 Jun '06

Sehr geehrte Damen und Herren, ich darf Sie auf folgende Veranstaltung aufmerksam machen: 21. WORKSHOP AUSTRIAN WORKING GROUP ON BANKING & FINANCE 24. / 25. November 2006 ALPEN-ADRIA-UNIVERSITÄT KLAGENFURT First CALL for PAPERS http://www.uni-klu.ac.at/fgk/assets/images/DP/AWG-21_CallPaper.pdf Der Workshop findet am Freitag, dem 24. November 2006, Nachmittag, und am Samstag, dem 25. November 2006, Vormittag, an der ALPEN-ADRIA-UNIVERSITÄT KLAGENFURTstatt. Bezüglich der Themen ist keine Einschränkung vorgesehen. Papers oder Extended Abstracts (ca. 2 Seiten) können bis spätestens 29. Oktober 2006 bei o.Univ.-Prof. Mag. Dr. Wolfgang Nadvornik Institut für Finanzmanagement, Universitätsstraße 65-67, A 9020 Klagenfurt Tel.: +43(0)463 2700-4002 Fax: +43(0)463 2700-4092 E-Mail: barbara.wernig(a)uni-klu.ac.at eingereicht werden. Um den angestrebten Workshopcharakter der Veranstaltung zu fördern, können papers auch durch einen discussant besprochen werden. Jene Teilnehmer, die eine solche Vorgangsweise wünschen, werden gebeten, ihr Manuskript bis 15. Oktober 2006 einzureichen. Ziele: Schaffen eines österreichweiten Diskussionsforums für theoretische und empirische Forschungsarbeiten auf dem Gebiet des Bankwesens und der Finanzwirtschaft. Förderung der Zusammenarbeit innerhalb der Hochschulen und der Zusammenarbeit mit der Praxis. Teilnehmer: Angesprochen sind sowohl der wissenschaftliche Nachwuchs an allen österreichischen Universitäten und verwandten Institutionen der Forschung als auch Praktiker in Kreditinstituten und Finanzabteilungen von Unternehmen. Schwerpunkte: Arbitrage Pricing - Business Valuation - Capital Market Theory - Capital Requirements of (Auswahl) Financial Intermediaries - Commercial Banking - Contingent Claims Analysis - Corporate Finance - Financial Innovations - Financial Markets Research - International Banking and Finance - Investment Banking - Options and Futures - Performance Measurement - Portfolio Management - Risk Management - Security Analysis.

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[VFN] VGSF Research Seminar by Branco Urosevic on Friday, June 23rd
by Michael Halling 21 Jun '06

21 Jun '06

Prof. Branco Urosevic from the Faculty of Economics, Belgrade (Serbia), and the Department of Economics and Business, Universitat Pompeu Fabra, Barcelona (Spain) is giving a VGSF research seminar on "Ownership Dynamics with Multiple Insiders: The case of REITs" on FRIDAY, June 23rd, from 15:30 to 17:00 at the Institute for Advanced Studies (Institut für Höhere Studien, Stumpergasse 56, 1060 Wien), Lecture Room (HS) 2. Please find the paper's abstract below. Coffee and snacks are going to be available in the cafeteria of IHS, which is located next to the lecture room, before and after the seminar. Information regarding the further schedule of the VGSF research seminar can be found at www.vgsf.ac.at! Best, Michael Halling Abstract We study ownership dynamics of multiple strategic risk-averse insiders facing a moral hazard problem. We show that, when insiders cannot commit, ex-ante, to an ownership policy, the aggregate insider stake gradually declines towards the competitive allocation. Moreover, both the speed of decline and the long-term equilibrium aggregate insider ownership level are greater for companies with a higher number of insiders, ceteris paribus. We, then, test the model on data from the U.S. Real Estate Investment Trusts (REITs) industry and find that the predictions of the model are supported by the data.

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[VFN] Extra-VGSF Research Seminar by Philipp Schönbucher on Monday 19th
by Michael Halling 14 Jun '06

14 Jun '06

Prof. Philipp Schönbucher from the ETH Zurich is giving an Extra-VGSF research seminar on "Portfolio Losses and the Term Structure of Loss Transition Rates: A new methodology for the pricing of portfolio credit derivatives" on Monday, June 19th, from 18:00 to 19:30 at the Vienna University of Business Administration and Economics (WU Wien, Nordbergstrasse 15, 1090 Wien), SR A619, UZA 4. Please find the paper's abstract below. Best, Michael Halling Abstract In this paper, we present a model for the joint stochastic evolution of the cumulative loss process of a credit portfolio and of its probability distribution. At any given time, the loss distribution of the portfolio is represented using forward transition rates, i.e. the transition rates of a hypothetical time-inhomogeneous Markov chain which reproduces the desired transition probability distribution. This approach allows a straightforward calibration of the model (e.g. to a full initial term- and strike structure of synthetic CDOs including the correlation smile) and it is shown that (except for regularity restrictions) every arbitrage-free loss distribution admits such a representation with forward transition rates. To capture the stochastic evolution of the loss distribution, the transition rates are then equipped with stochastic dynamics of their own, and martingale / drift restrictions on these dynamics are derived which ensure absence of arbitrage in the model. Furthermore, we analyze the dynamics of spreads and STCDO-prices that are implied by the model and show that the input parameters can be viewed as spread move parameters and correlation move parameters. We also show how every dynamic model for correlated individual defaults can be cast into this framework.

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[VFN] Invitation June 29th Public Lecture with Prof. Ananth Madhavan "Transaction Cost Modeling as a Source of Alpha"
by Gutmann Center-D.Grimm 12 Jun '06

12 Jun '06

GUTMANN CENTER FOR PORTFOLIO MANAGEMENT at the University of Vienna - http//:www.gutmann-center.at invites to the following PUBLIC LECTURE: (Apologies for any cross-listings!): Date: June 29th, 2006 - 4.00 p.m. Location: Bank Gutmann AG, Schwarzenbergplatz 16, 1010 Wien Speaker: Prof. Dr. Ananth MADHAVAN, Barclays Global Investors (BGI) Title: TRANSACTION COST MODELING AS A SOURCE OF ALPHA The impact of realized transaction costs on portfolio performance is now well recognized. Less well understood, however, is the effect of transaction cost on performance in the pre-trade dimension. Intuitively, transaction costs affect performance through the choice of bets the manager undertakes (breadth), the frequency of bets (turnover), and the size of those bets (order size). We show that transaction cost modeling is a source of alpha (superior performance).Specifically, accurate transaction cost models allow managers to make better decisions regarding which securities should or should not be traded, and the optimal size of the trade. About Ananth Madhavan: Ananth Madhavan is the Global Head of Trading Research at BGI. He leads BGI's global trading research team with a focus on execution research and trading strategies across different asset classes worldwide. Prof. Madhavan also works closely with the global trading team and BGI’s alpha research and product groups to design and implement trading strategies capturing liquidity-driven market opportunities. Before joining BGI in 2003, Prof. Madhavan was Managing Director of Research of ITG, Inc. and a member of the firm’s management and executive committees. Previously, he was the Charles B. Thorton Professor of Finance at the Marshall School of Business at the University of Southern California, and Assistant Professor of Finance at the Wharton School of the University of Pennsylvania. Ananth Madhavan is the author of numerous publications in leading academic and practitioner journals. He received his PhD in Economics from Cornell University and BA from the University of Delhi, India. Please REGISTER: Mail: gutmann.bwl(a)univie.ac.at Phone: +43-1-4277-38186 - Fax: +43-1-4277-38074 Contact and further information: Gutmann Center for Portfolio Management University of Vienna - Mag. Dorothea GRIMM Bruenner Str. 72 - 1210 Wien (Austria) phone: +43-1-4277-38186 - fax: +43-1-4277-38074 mail: gutmann.bwl(a)univie.ac.at - web: www.gutmann-center.at

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[VFN] TRIPLE VGSF Research Seminar - David Feldman, Kai Li and Martijn Cremers
by Michael Halling 07 Jun '06

07 Jun '06

Next week the VGSF is organizing THREE seminars - one on MONDAY, June 12th, and two on TUESDAY, June 13th. Prof. David Feldman from the University of New South Wales is going to talk about "The CAPM Relation for Inefficient Portfolios" on Monday, June 12th, from 15:30 to 17:00 at the BWZ, Seminar Room 1, Bruennerstr. 72,1210 Wien. On TUESDAY, June 13th, two seminars by Kai Li, University of British Columbia, and Martijn Cremers, University of Yale, are scheduled. Kai is going to talk about "Corporate Boards and the Leverage and Debt Maturity Choices". The paper presented by Martijn has to be still announced. This double seminar takes place from 16:00 to 19:00 in Lecture Room 2 at the Institute for Advanced Studies (Stumpergasse 56, 1060 Wien). Information regarding the further schedule of the VGSF research seminar can be found at www.vgsf.ac.at! Best, Michael Halling Abstract of "The CAPM Relation for Inefficient Portfolios" ********************************************************** Following empirical evidence that - contrary to CAPM predictions - found little relation between expected rates of return and betas, the relation has been investigated extensively. Roll and Ross (1994) (RR) and Kandel and Stambaugh (1995) are seminal works. In this context, within a Markowitz world (finite number of nonredundant risky securities with finite first two moments), we generally and simply write the theoretical CAPM relation for inefficient (non-frontier) portfolios (CAPMI). We demonstrate that the CAPMI is a well-specified alternative for the widely implemented misspecified CAPM for use with inefficient portfolios. We identify three sources for this misspecification: i) the omission of an addend in the pricing relation, ii) the use of an incorrect risk premiums/beta coefficients (due to of the existence of infinitely many "zero beta" portfolios at all expected returns), and iii) the use of unadjusted betas. We suggest the use of incomplete information equilibria to overcome unobservability of moments of returns. Our results are robust to regressions that produce positive explanatory beta power, including extensions such as multiperiod, multifactor, and the conditioning on time and various attributes. Abstract of "Corporate Boards and the Leverage and Debt Maturity Choices" ************************************************************************** Debt, and in particular, short-term debt have the potential to discipline managers. We examine the role of the board in making financing decisions that provide this discipline. Specifically, given a firm's characteristics, we predict that stronger boards will force the firm to hold more debt and more shortterm debt, and that the effect of the board on the use of short-term debt is likely to be stronger among low-growth firms than among high-growth firms. Employing a rich dataset of board characteristics and controlling for other aspects of a firm's corporate governance, we find support for these hypotheses. Moreover, the degree to which director tenure on the board exceeds the CEO tenure is the most important driver of board strength in our study. This simple measure of the relative power and true independence of directors relative to the CEO is a robust and promising measure of internal governance.

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[VFN] REMINDER: VGSF Research Seminar by Prof. Josef Zechner on June 2nd
by Michael Halling 02 Jun '06

02 Jun '06

Prof. Josef Zechner from the University of Vienna is giving a VGSF research seminar on "Human Capital, Bankruptcy, and Capital Structure" on Friday, June 2nd, from 15:30 to 17:00 at the Institute for Advanced Studies (Institut für Höhere Studien, Stumpergasse 56, 1060 Wien), Lecture Room (HS) 2. Please find the paper's abstract below. Coffee and snacks are going to be available in the cafeteria of IHS, which is located next to the lecture room, before and after the seminar. Information regarding the further schedule of the VGSF research seminar can be found at www.vgsf.ac.at! Best, Michael Halling Abstract This paper identifies a previously overlooked friction, human capital risk, which can explain an important puzzle in corporate finance why firms maintain such low levels of debt, given the apparently modest costs of bankruptcy. We derive the optimal compensation contract when employees are averse to their own human capital risk, but equity holders are not averse to this risk, and show that, in the absence of other frictions, all firms will be unlevered. In the presence of corporate taxes, optimal debt levels are consistent with the levels observed, implying that human capital risk is of the same order of importance as taxes in the capital structure decision. Because these costs are impossible to measure directly, existing empirical studies that attempt to measure the costs of bankruptcy grossly underestimate them.

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VFN-L June 2006