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vfn-l@fam.tuwien.ac.at

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[VFN] Ausschreibung Professur Empirische Finanzmarktforschung
by Michael Hanke 21 Jun '07

21 Jun '07

Am Institut für Banken und Finanzen ist die neu eingerichtete Professur für Empirische Finanzmarktforschung zur Besetzung ausgeschrieben: http://www.uibk.ac.at/ibf/aktuelles/ausschreibungek.pdf Bitte auch um Weiterleitung an möglicherweise interessierte Kollegen! Beste Grüße aus Innsbruck, Michael Hanke -- Prof. Dr. Michael Hanke University of Innsbruck Department of Banking and Finance Universitaetsstrasse 15 6020 Innsbruck, Austria Phone: +43 512 5077552, Fax: +43 512 5072846

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[VFN] Conference Adv. Math. Methods for Finance, Sept. 17-22, 2007, Vienna
by Uwe Schmock 19 Jun '07

19 Jun '07

Second Announcement +-----------------------------------------------+ | Workshop and Mid-Term Conference on | | Advanced Mathematical Methods for Finance | | (AMaMeF), September 17-22, 2007 | | <http://www.fam.tuwien.ac.at/amamef2007/> | +-----------------------------------------------+ organized by PRisMa Lab and FAM @ TU Vienna Location: Vienna University of Technology Wiedner Hauptstr. 8-10 1040 Vienna, Austria (travel grants available!) Scientific Program: Mo, Sep. 17th: Educational workshop (Speakers: Ernst Eberlein, Lane P. Hughston, Michèle Vanmaele) Tu, Sep. 18th: Scientific conference We, Sep. 19th: Scientific conference Tu, Sep. 20th: Scientific conference Fr, Sep. 21st: Practitioner's day Sa, Sep. 22nd: Scientific conference (half day) Invited Speakers (confirmed): - Ole E. Barndorff-Nielsen (University of Aarhus) "Noise, jumps and other annoyances - or delights" - Tomas Björk (Stockholm School of Economics) "Optimal investments under partial information" - Freddy Delbaen (ETH Zürich) "Monetary time consistent utility functions and the viscous Hamilton-Jacobi quasi-linear PDE" - Giulia Di Nunno (University of Oslo) "Events of small but positive probability and a version of the fundamental theorem of asset pricing" - Ernst Eberlein (Universität Freiburg) "Lévy driven equity, FX- and interest rate models" - Damir Filipovic (LMU München) - "tba" - Lane P. Hughston (King's College London) "Information-based asset pricing" - Ioannis Karatzas (Columbia University) "Stochastic portfolio theory: a survey" - Claudia Klüppelberg (TU München) "The continuous-time GARCH model" - Dmitry Kramkov (Carnegie Mellon University) - "tba" - Damien Lamberton (Université de Marne-la-Vallée) "Optimal stopping problems with irregular payoff functions" - Marek Musiela (BNP Paribas, London) - "tba" - Bernt Øksendal (University of Oslo) "Optimal portfolio for an insider in a strategic market equilibrium" - Chris Rogers (University of Cambridge) - "tba" - Wolfgang Runggaldier (Università degli Studi di Padova) "Contagious default: application of methods of statistical mechanics in finance" - Peter Schaller (Bank Austria Creditanstalt) "Consistent incorporation of statistical uncertainties into quantile estimates" - Christoph Schwab (ETH Zürich) "Numerical derivative pricing in non-BS markets" - Martin Schweizer (ETH Zürich) "Modelling option prices" - Mete Soner (Koc University Istanbul) - "tba" - Lukasz Stettner (Polish Academy of Sciences) "Portfolio selection with transaction costs, decision lag and execution delay" - Eva Strasser (JP Morgan) "Correlation modelling in equity derivatives" - Esko Valkeila (Helsinki University of Technology) "Approximation of geometric fractional Brownian motion" - Michèle Vanmaele (Universiteit Gent) "Comonotonicity applied in finance" - Constantin Varsan (Romanian Academy, Bucharest) "Asymptotic behaviour of piece-wise continuous solutions of S.D.E." - Thaleia Zariphopoulou (University of Texas) "Investment performance measurement, risk tolerance and optimal portfolio choice" Some Contributed Talks: - Giovanni Barone-Adesi (University of Lugano) "Barrier option pricing using adjusted transition probabilities" - Pavel Grigoriev (University of Leicester) "Kusuoka's formula for dynamic risk measures" - Laszlo Gyorfi (Budapest University) "Growth-optimal portfolio selection strategies with transaction costs" - Ludger Overbeck (Universität Giessen) "Risk measures for structured credit products" - Georg Pflug (Universität Wien) "Pricing of swing options and stochastic games" - Robert Stelzer (TU München) "Multivariate continuous time Lévy-driven GARCH processes" - Uwe Wystup (Mathfinance AG) "Closed-form exotic option pricing in the Heston model" For abstracts and updates see http://www.fam.tuwien.ac.at/amamef2007/abstracts.php Contributed Talks: You may apply to give a talk by sending an email to the conference secretary (see below). Please include the title and an abstract. The deadline to apply is June, 30th. The organizing committee tries to answer as soon as possible, but please understand that they can't immediately decide whether your talk is accepted or not. Poster Presentations: There is the possibility of poster presentations. Please apply the same way as for contributed talks. The deadline for applications is June, 30th. Grants for Ph.D. students and young PostDocs: Thanks to the AMaMeF program, we have several travel grants available covering the conference fee and up to ¤ 400,- for travel and accommodation. These are available for Ph.D. students and young postdocs. To apply for one of these grants, please send a current curriculum vitae (including a short description of your current research) to the conference secretary. The deadline for applications is June, 30th. There is a strong preference for applicants who give a talk or a poster presentation. Conference Secretary: Mr. Christian Gawrilowicz (FAM @ TU Vienna) Phone: +43-1-58801-10511 E-mail: secr(a)fam.tuwien.ac.at Organizing Committee: - Peter Grandits - Friedrich Hubalek - Reinhold Kainhofer - Johannes Leitner - Walter Schachermayer - Uwe Schmock For registration details, conference fees, etc., please visit the conference web site at <http://www.fam.tuwien.ac.at/amamef2007/>, which will be updated continuously. We are looking forward to welcome you in Vienna! On behalf of the Organizing Committee, Uwe Schmock Prof. Dr. Uwe Schmock Institute for Mathematical Methods in Economics Research Unit: Financial and Actuarial Mathematics Vienna University of Technology Wiedner Hauptstrasse 8-10/105-1 A-1040 Vienna Austria Financial and Actuarial Mathematics (FAM) at TU Vienna <http://www.fam.tuwien.ac.at/> CD-Laboratory for Portfolio Risk Management (PRisMa Lab) <http://www.prismalab.at/>

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[VFN] VGSF Research Seminar on Friday, June 22nd, by Richard Stanton
by Michael Halling 18 Jun '07

18 Jun '07

Richard Stanton from UC Berkeley is giving a VGSF research seminar on "Optimal Exercise of Executive Stock Options and Implications for Firm Cost" on FRIDAY, June 22nd, from 15:30 to 17:00 in HS 7 at the BWZ, Brünnerstrasse 72, 1210 Wien. See the VGSF webpage (Activities & Events --> Research Seminars) for a map of the location, the paper to download and this term's entire schedule of seminars. Please find the paper's abstract below. Please contact Youchang Wu if you would like to meet and discuss your research with Richard. Best, Michael Halling Abstract The cost of executive stock options has become a focus of investor attention. The difficulty is that option cost depends on the exercise policies of executives. This paper analyzes the optimal policy for a general utility-maximizing executive holding a nontransferable option. We show analytically how the policy varies with risk aversion, wealth, and dividend rate, and when the policy is characterized by a single stock price boundary. We also provide an example with a split continuation region. In CRRA examples, option value decreases with risk aversion, increases with wealth, increases with outside hedging opportunities, but can actually decline with volatility.

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[VFN] Assistant Professor Position, Kennzahl: 37573/MB
by Martina Schlichting 15 Jun '07

15 Jun '07

*The Finance Department of the University of Vienna invites Applications for an Assistant Professor Position* (Universitätsassistent) *Department of Finance,* Faculty of Economics and Business Administration (O. Univ.-Prof. Dr. Josef Zechner) *Location:* Vienna, Austria The position is available starting in July 2007. The duration of the employment contract is six years. Applicants should have high research potential and must have completed their doctoral degree. Applications are invited in all fields of Finance. The successful candidate is expected to take an active role in the department's research activities, engage in joint research projects, interact with seminar speakers and visiting faculty and contribute to the doctoral programme, the Vienna Graduated School of Finance. Teaching responsibilities are limited to 3 class room hours per week per semester. The teaching language will be English. Finance as one of our faculty's strategic areas of development for research and teaching activities. Through its successful track record in this area, the University of Vienna hopes to attract candidates with international exposure who are willing to contribute to its development as a strong centre for academic research in Finance. The University of Vienna is an Equal Opportunity Employer. Women are encouraged to apply. *Applications/Contact Details* Applicants should submit their application before June 24, 2007 to Universität Wien Personalabteilung Kennzahl: 37573/MB Dr.-Karl-Lueger-Ring 1 A-1010 Wien. Further informations are available at <http://personalabteilung.univie.ac.at/index.php?id=job>.

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[VFN] 22. Workshop der AWG in Innsbruck, 23. & 24. November 2007
by office＠bwg.at 12 Jun '07

12 Jun '07

22. Workshop der Austrian Working Group on Banking and Finance Das Institut für Banken und Finanzen (o. Univ.-Prof. Dr. M. Bank, CFA / a.o. Univ.-Prof. Dr. M. Hanke / o. Univ.-Prof. Dr. K. Schredelseker) an der Leopold-Franzens-Universität Innsbruck veranstaltet gemeinsam mit der Österreichischen Bankwissenschaftlichen Gesellschaft am 23. und 24. November 2007 in Innsbruck den 22. Workshop der Austrian Working Group on Banking and Finance Der Workshop findet am Freitag, dem 23. November 2007, nachmittags, und am Samstag, dem 24. November 2007, vormittags, an der Leopold-Franzens-Universität Innsbruck statt. Bezüglich der Themen ist keine Einschränkung vorgesehen. First CALL for PAPERS Papers oder Extended Abstracts (ca. zwei Seiten) können bis spätestens 12. Oktober 2007 bei o. Univ.-Prof. Dr. M. Bank, CFA, Leopold-Franzens-Universität Innsbruck, Institut für betriebliche Finanzwirtschaft, Hypo Tirol Stiftungsprofessur für Banking & Finance, A-6020 Innsbruck, Universitätsstraße 15, oder e-mail: banken-finanzen(a)uibk.ac.at, eingereicht werden. Um den angestrebten Workshop-Charakter der Veranstaltung zu fördern, können Papers durch einen Discussant besprochen werden. Jene Teilnehmer, die eine solche Vorgangsweise wünschen, werden gebeten, ihr Manuskript bis 1. Oktober 2007 einzureichen. Der Call for Papers kann als pdf unter http://www.bwg.at/bwg2/bwg.nsf/Menue/1.4 abgerufen werden.

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[VFN] Invitation: June 26th - Public Lecture with David Hirshleifer "A Tour of Behavioral Finance"
by Gutmann Center-D.Grimm 11 Jun '07

11 Jun '07

GUTMANN CENTER FOR PORTFOLIO MANAGEMENT at the University of Vienna - http//:www.gutmann-center.at invites to the following PUBLIC LECTURE: - apologies for duplicated emails! - Date: June 26th, 2007, 4.00 pm Location: Bank Gutmann AG, Schwarzenbergplatz 16, 1010 Wien Speaker: Prof. Dr. David HIRSHLEIFER, University of California at Irvine http://web.merage.uci.edu/~Hirshleifer/ Title: A TOUR OF BEHAVIORAL FINANCE Abstract: Using classical tools, the behavioral revolution in finance has laid the groundwork for a new asset pricing paradigm based upon the psychology of investors. In this approach, security expected returns are determined by both risk and mispricing. In this overview of psychology and asset pricing, I describe how psychological bias affects investor decisions and market prices. I illustrate with examples of how feelings, limited attention, and overconfidence affect financial markets. About David Hirshleifer: David Hirshleifer is Professor of Finance and Merage Chair in Business Growth at the Merage School of Business, University of California-Irvine, which he joined after serving as the Kurtz Chair in Finance at Ohio State University, the Waterman Professor of Finance at the University of Michigan, and as a tenured faculty member at UCLA. Some of his recent research has explored psychology and securities markets, how emotions affect stock prices and managerial decision biases, and how firms exploit market inefficiency. He has also conducted research on risk management, corporate finance, futures pricing, and the role of social learning in the spread of fads and fashions. His research has been profiled in international news media, and has won several awards, including the Smith-Breeden Award for outstanding paper in the Journal of Finance. Professor Hirshleifer has served as a consultant for securities and money management firms; as editor of the Review of Financial Studies; as associate editor of the Journal of Finance; in editorial positions at several other finance, economics, and strategy journals; and as director of the American Finance Association and the Western Finance Association. 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] 3rd Annual CARISMA Seminar on Program Trading Techniques and Financial Models for Hedge Funds
by Xiaochen Sun 25 May '07

25 May '07

{Apologise for cross-sending.} Dear Colleagues, On behalf of Professor Gautam Mitra, CARISMA, we are pleased to announce the forthcoming events on Program Trading and Hedge Funds. Please find the details below (or request PDF brochures for both conference and workshops by email to mapgxcs(a)brunel.ac.uk / info(a)unicom.co.uk ). We are also delighted to announce that ALL STUDENTS and ACADEMIC RESEARCHERS WILL BENEFIT THE EARLY BIRD RATE, besides that there are some discounts for group booking. We would appreciate if you could distribute this message to those colleagues who are interested in this topic. Program Trading Techniques and Financial Models for Hedge Funds: 3rd Annual CARISMA Seminar <https://owa1.brunel.ac.uk/exchweb/bin/redir.asp?URL=https://owa1.brunel.ac.…> 26 - 27 June 2007, London Related workshops: * Robust Portfolio Optimisation <https://owa1.brunel.ac.uk/exchweb/bin/redir.asp?URL=https://owa1.brunel.ac.…> - Daniel Bienstock, Columbia University, 25 June - Half Day * Structuring Step-up CDOs: an Optimization Approach (including models and software demonstration) <https://owa1.brunel.ac.uk/exchweb/bin/redir.asp?URL=https://owa1.brunel.ac.…> - Stanislav Uryasev, University of Florida, and Gautam Mitra, CARISMA & OptiRisk Systems 25 June - Half Day * Great investors and hedge fund managers:their methods and evaluation <https://owa1.brunel.ac.uk/exchweb/bin/redir.asp?URL=https://owa1.brunel.ac.…> - William T Ziemba, University of British Columbia, 25 June * Financial Innovation <https://owa1.brunel.ac.uk/exchweb/bin/redir.asp?URL=https://owa1.brunel.ac.…> - Dilip Madan, University of Maryland, and Marek Musiela, BNP Paribas, 28 June 2007 * Algorithmic Decision Making Framework <https://owa1.brunel.ac.uk/exchweb/bin/redir.asp?URL=https://owa1.brunel.ac.…> - Roberto Malamut, SAC Capital Advisors, with guest presentation by Ekaterina Kochieva, CARISMA, 28 June Conference Programme * Day One Continuing Research on Optimal Trade Execution - Daniel Bienstock, Professor of Operations Research, Columbia University A Market Impact Model That Works - Dan diBartolomeo, Northfield Information Services, Inc., and Visiting Professor, CARISMA High Frequency Trading on Equity Market Micro Structure Evolution - M A H Dempster, Centre for Financial Research, Judge Business School University of Cambridge; V Leemans, Goldman Sachs, London Algorithmic Execution: Some future challenges - Gordon Baker, Head, Algorithmic Execution Services, Deutsche Bank Optimal Liquidation Against a Markovian Limit Order Book - Patrick Hewlett, OCIAM, University of Oxford Automated New Content and Algorithmic Trading - Philip Gagner, RavenPack International SL Algorithmic Trading of Hedge Funds - Nicos Christofides, Director, Centre for Quantitative Finance, Imperial College Invitation-only senior executive networking event on the first evening, which will be attended by an additional group of guests * Day Two Theory of Acceptability Indices Applied to Evaluating Hedge Fund Performance - Dilip Madan, University of Maryland Improving Hedge Fund Performance via Multi-Stage Stochastic Programs - John M. Mulvey, Professor of Operations Research, Princeton University Validation of Derivatives Pricing Models - Dario Cziraky, Insightful Independent Components Analysis of Hedge Fund Returns - Andrew Robinson, APT Detection of Momentum Effects Using an Index Out-performance Strategy - N. Meade, Imperial College & J.E. Beasley, CARISMA Portfolio Optimization with Drawdown Constraints - Stan Uryasev, University of Florida, USA, and American Optimal Decisions Algorithmic Decision Making Framework - Roberto Malamut, SAC Capital Advisors For further details please go to http://www.carisma.brunel.ac.uk/newsandinfo.html <https://owa1.brunel.ac.uk/exchweb/bin/redir.asp?URL=https://owa1.brunel.ac.…> or www.unicom.co.uk/finance <https://owa1.brunel.ac.uk/exchweb/bin/redir.asp?URL=https://owa1.brunel.ac.…> or email mapgxcs(a)brunel.ac.uk or info(a)unicom.co.uk <mailto:info@unicom.co.uk> for a PDF flier. We look forward to welcoming you to the conference and workshops, please also make your colleagues aware of it. With kind regards Michael Sun ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Michael(Xiaochen) Sun CARISMA, www.carisma.brunel.ac.uk <http://www.carisma.brunel.ac.uk/> Centre for the Analysis of Risk and Optimisation Modelling Application; School of Computing, Information Systems and Mathematics Brunel University Uxbridge, UB8 3PH United Kingdom Email: xiaochen.sun (at) brunel.ac.uk http://optirisk.googlepages.com/ <http://optirisk.googlepages.com/> http://people.brunel.ac.uk/~mapgxcs <http://people.brunel.ac.uk/~mapgxcs> Blog: http://mam3xs.blogspot.com <http://mam3xs.blogspot.com/> Tel: (+44) (0)1895 265625 Mobile: (+44) (0)7841873292 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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[VFN] VGSF Research Seminar on Friday, May 25th, by Günter Strobl
by Michael Halling 23 May '07

23 May '07

Günter Strobl from the University of North Carolina, Chapel Hill, is giving a VGSF research seminar on "Time-Varying Information Asymmetry and the Disposition Effect" on FRIDAY, May 25th, from 15:30 to 17:00 in HS 7 at the BWZ, Brünnerstrasse 72, 1210 Wien. See the VGSF webpage (Activities & Events --> Research Seminars) for a map of the location, the paper to download (soon) and this term's entire schedule of seminars. Please find the paper's abstract below. Best, Michael Halling Abstract Economists have long been puzzled by the tendency of investors to sell winning investments too soon and hold losing investments too long. Several behavioral explanations for this phenomenon, known as the disposition effect, have been advanced. This paper demonstrates that the disposition effect is not intrinsically at odds with rational behavior. We present a rational expectations model with asymmetrically informed investors and show that, for some parameterizations, trading strategies as predicted by the disposition effect are in fact an optimal response to dynamic changes in the information structure. We provide conditions under which the disposition effect holds and derive new empirical implications relating it to public news releases, trading volume, and stock price dynamics.

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[VFN] Reminder: Invitation Gutmann Center Symposium 2007 on June 1st
by Gutmann Center-D.Grimm 22 May '07

22 May '07

The Gutmann Center for Portfolio Management at the University of Vienna http://www.gutmann-center.at is pleased to announce the GUTMANN CENTER SYMPOSIUM 2007: CREDIT RISK AND THE MANAGEMENT OF FIXED INCOME PORTFOLIOS - With copious apologies for duplicated emails! - June 1st, 2007 - 9.00 am - 6.30 pm, University of Vienna (Austria) Aula Altes AKH, Hof 1, Alser Str. 4, 1090 Wien Fixed income products and credit derivatives represent booming markets with predictable cash-flows and attractive return-risk profiles. Still, the economic relationships underlying these products are very sophisticated. Determinants of credit spreads, the price of default and liquidity risk and models of default correlations are important questions in academic research and have immediate implications for fixed income fund management. At the Gutmann Symposium 2007 internationally recognized experts will address these issues and present their most current research results. 08.30-09.00 Registration 09.00-09.15 WELCOME Josef Zechner - University of Vienna 09.15-10.45 SESSION I: CREDIT SPREADS AND CREDIT RATINGS Chair: Josef Zechner - University of Vienna "Cash Holdings and Credit Spreads" Sergei Davydenko - University of Toronto Discussant: Youchang Wu - University of Vienna "Inflation Uncertainty, Asset Valuations, and the Credit Spreads Puzzle" Alexander David - University of Calgary Discussant: Thomas Steinberger - University of Vienna "Bayesian Inference for Issuer Heterogeneity in Credit Ratings Migration" Ashay Kadam - Cass Business School Discussant: Alexander David - University of Calgary 10.45-11.15 - coffee break - 11.15-12.45 SESSION II: CREDIT DEFAULT SWAP MARKETS: DEFAULT, LIQUIDITY AND RECOVERY RISK Chair: Klaus Spremann - University St. Gallen "Liquidity and Liquidity Risk Premia in the CDS Market" Dion Bongaerts - University of Amsterdam Discussant: Holger Kraft - University of Kaiserslautern "Liquidity and Credit Default Swap Spreads" Dragon Yongjun Tang - Kennesaw State University Discussant: Stefan Pichler - Wirtschaftsuniversität Wien "Separating the Components of Default Risk: A Derivative-Based Approach" Anh Le - New York University Discussant: Ashay Kadam - Cass Business School 12.45-14.00 - lunch break - 14.00-15.30 PANEL DISCUSSION: CREDIT RISK MARKETS - OPPORTUNITIES AND CHALLENGES Chair: Engelbert Dockner - University of Vienna Discussants: Joe Biernat - European Credit Management Limited (ECM) Pierre Collin-Dufresne - UC Berkeley/ Goldman Sachs Asset Management Stephen Schaefer - London Business School Suresh Sundaresan - Columbia University Friedrich Strasser - Bank Gutmann AG 15.30-16.00 - coffee break - 16.00-17.00 SESSION III: STRUCTURAL CREDIT RISK MODELS Chair: Stephen Schaefer - London Business School "On the Relation between the Credit Spread Puzzle and the Equity Premium Puzzle" Pierre Collin-Dufresne - UC Berkeley/ Goldman Sachs Asset Management Discussant: Neal Stoughton - University of Calgary "Specification Analysis of Structural Credit Risk Models" Jing-zhi Huang - Penn State University Discussant: Thomas Dangl - Vienna University of Technology 17.00-17.15 - coffee break - 17.15-18.15 SESSION IV: FIXED INCOME PORTFOLIO MANAGEMENT Chair: Robert Korajczyk - Northwestern University "An ABC of Portfolio Choice: Asset Allocation with Bankruptcy and Contagion" Holger Kraft - University of Kaiserslautern Discussant: Helmut Elsinger - University of Vienna "Understanding Common Factors in Domestic and International Bond Spreads" Rodolfo Martell - Purdue University Discussant: Otto Randl - Anaxo - refreshments - Participation fee: the participation is free, but all participants are required to register. Contact: Gutmann Center for Portfolio Management University of Vienna - Dorothea Grimm - gutmann.bwl(a)univie.ac.at Phone: +43-1-4277-38186 Fax: +43-1-4277-38074 Web: www.gutmann-center.at

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[VFN] VGSF Research Seminar on Friday, May 18th, by Toni M. Whited
by Michael Halling 16 May '07

16 May '07

Toni M. Whited from the University of Wisconsin, Madison, is giving a VGSF research seminar on "The Corporate Propensity to Save" on FRIDAY, May 18th, from 15:30 to 17:00 in HS 7 at the BWZ, Brünnerstrasse 72, 1210 Wien. See the VGSF webpage (Activities & Events --> Research Seminars) for a map of the location, the paper to download (soon) and this term's entire schedule of seminars. Please find the paper's abstract below. Best, Michael Halling Abstract We study corporate saving in a stochastic, dynamic model of the firm with endogenous choices of external finance, distributions, cash, and investment. Intertemporal trade-offs between costly external finance and interest income taxation determine optimal savings. Unlike static models, our model produces negative propensities to save out of income because firms lower cash reserves to invest after receiving good productivity news, and vice versa. OLS regressions using international data replicate positive saving propensities found previously. However, treating measurement error in Tobin's q produces negative propensities, consistent with our model. Empirically, income uncertainty matters more for saving than the cost of external finance.

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