Chair of International Finance. Seminar HWS2016 Empirical Finance Zorka Simon, Michael Ungeheuer and Anja Kunzmann

Transcription

1 Seminar HWS2016 Empirical Finance Zorka Simon, Michael Ungeheuer and Anja Kunzmann

2 What are the prerequisites? You are a master student. You have successfully completed at least one finance course (Albrecht, Maug, Niessen-Ruenzi, Ruenzi, Terberger, Theissen, Weber). Some knowledge of statistics and econometrics is useful and participants should be motivated to undertake empirical work. You are available in the time period from end of June to end of August. 2

3 Schedule Tue, Topics Announcement (LS Webpages) Wed, , 1.30 pm 5.00 pm Topics Presentation pm Weber pm Rünzi pm Theissen (L9, 1-2, Room 009) Mo, Fr, Submission of Priority Lists (Internet) Mo, Topics Allocation Announcement (LS Webpages) Mo, Starting Date Mo, Fr, Registration/Withdrawal Period Mo, , 12 pm Submission of Seminar Papers (6 Weeks) Mo, , 12 pm Submission of Seminar Papers (8 Weeks) 3

4 Stata and database tutorial Short crash-course on how to write an empirical paper using Stata and the databases offered at the University of Mannheim. Not a mandatory prerequisite for writing a seminar paper or master thesis. No ECTS Schedule: Tuesday, June 28 (9-12am) Tuesday, June 28 (1-2.30pm) Wednesday, June 29 (10-12am, 1-3pm) Thursday, June 30 (10-12am, 1-3pm) Friday, July 1 (9am-1pm) Getting to know Stata Databases at the University of Mannheim Database manipulation and estimation Basic programming structures Case study The tutorial takes place in room 1.58 (PC-Pool), L7, 3-5. Detailed information on the tutorial is available on the website of the Chair of Prof. Theissen: 4

5 How to apply? Submit your priority list online between June 6 and June 10, 2016 (link on our website). You can combine topics from different chairs. E.g. First preference: 3 rd Topic, Chair of Prof. Ruenzi ; Second preference: 10 th Topic, Chair of Prof. Weber ; Third preference: 4 th Topic, Chair of Prof. Theissen Please only choose topics you are really willing to work on. The allocation of topics is based on the average grade of your finance exams. Priority will be given to students in their third or higher master semester. 5

6 How do we grade? Supervision of the seminar paper by Prof. Ruenzi and the assigned advisor. Grading: 50% seminar paper 25% presentation of the seminar paper 15% discussion of an assigned seminar paper of a fellow student 10% oral participation in the discussion Own empirical contribution will be rewarded. Plagiarism: no excuse policy If you do not pass or do not hand in your seminar thesis, you must(!) write your seminar thesis at our chair in the upcoming semester break. This is a rule by the examinations office. 6

7 How should your paper look like? ~12 pages (without appendix) Language: English Detailed formal requirements: On the website: For further information see guidelines of the Chair of Prof. Maug and/or guidelines of the Chair of Prof. Weber 7

8 R1: Stock Returns and the Cross-Section of Investor Attention Advisor: Michael Ungeheuer Empirical topic Motivation: Barber/Odean (2008): investor attention buy-sell-imbalances Proxy for investor attention: extreme stock returns (assume: v-pattern relation) Da/Engelberg/Gao (2011): investor attention stock returns (price impact-reversal) Proxy for investor attention: Google search volume for tickers Research question: stock returns investor attention? - Hartzmark (2014): The worst, the best, ignoring all the rest? - Other questions: Asymmetry for negative vs. positive returns? Discontinuity at zero? Look-back horizon and persistence of effects? Data: CRSP, Compustat and Wikipedia page view data (Wiki data is provided). Requirements: We recommend that the candidate should feel comfortable in the use of a statistical software program and econometrics (such as STATA). 8

9 R2: Market Returns and the Time Series of Investor Attention Advisor: Michael Ungeheuer Empirical topic Motivation: Barber/Odean (2008): investor attention buy-sell-imbalances Proxy for investor attention: extreme stock returns (assume: v-pattern relation) Sicherman et al. (2016): bad market return lower attention (ostrich effect) Proxy for investor attention: Online log-in counts Research question: stock market returns investor attention? - Barber/Odean (2008): V-pattern? - Sicherman et al. (2016): Lower attention for negative market returns? - Da/Engelberg/Gao (2014): Higher attention during market crashes? Data: CRSP, Compustat and Wikipedia page view data (Wiki data is provided). Requirements: We recommend that the candidate should feel comfortable in the use of a statistical software program and econometrics (such as STATA). 9

10 R3: Are Daily Winners and Losers Overpriced? Advisor: Michael Ungeheuer Empirical topic Motivation: Barber/Odean (2008): investor attention buy-sell-imbalances Da/Engelberg/Gao (2011): investor attention stock returns (price impact-reversal) Hartzmark (2014): The worst, the best, ignoring all the rest? Easy to obtain information on daily winners and losers (online information, WSJ, NYT) Research question: Are daily winners and losers overpriced? Challenge: How is this effect related to the idiosyncratic volatility puzzle? Data: CRSP, Compustat and Wikipedia page view data (Wiki data is provided). Requirements: We recommend that the candidate should feel comfortable in the use of a statistical software program and econometrics (such as STATA). 10

11 R4: Carry Advisor: Zorka Simon Empirical topic Motivation: A currency carry trade is a trading strategy in which an investor sells a certain currency with a low interest rate and uses the proceeds to purchase a different currency yielding a higher interest rate. The profit of this trade is based on the difference in yields and the amount of leverage used. Koijen et al (2015) broaden and apply the concept of carry to any asset. A security's expected return can be decomposed into its "carry" and its expected price appreciation. Carry predicts returns of any assets better than other known return predictors Goal of seminar paper: Brief overview of the literature on currency carry and the use of carry to predict returns of different asset classes. Replicate the main findings of Koijen et al. (2015) on a chosen asset class (preferably not US equities). Data: Datastream and Bloomberg (access provided). Requirements: We recommend that the candidate should feel comfortable in the use of a statistical software program and econometrics (such as STATA or Matlab). 11

12 R5: Safe haven CDS premia Advisor: Zorka Simon Empirical topic Motivation: CDS or credit default swaps are the most common credit derivatives. Most common underlying products are sovereign debt, municipal bonds, mortgage-backed securities or corporate bonds. Klinger and Lando (2015) show that a for safe-haven sovereigns, like Germany and the United States, the price of CDS not only reflects the credit risk of the country, but it is distorted by the excess demand of banks, which is induced by prudential regulation. Bai and Collin-Dufresne (2013) find that CDS-bond basis, the difference between credit default swap spread and cash-bond implied credit spread, varies both over time and in the cross-section of countries. Goal of seminar paper: Brief overview of the literature on CDS pricing and puzzles of CDS, such as the safe haven CDS premia or the CDS-bond basis. Replicate the main empirical findings of one of the seminal papers in this strand of the literature on a sample of European or G7 countries. Data: Datastream and Bloomberg (access provided). Requirements: We recommend that the candidate should feel comfortable in the use of a statistical software program and econometrics (such as STATA or Matlab). 12

13 R6: Investor inattention and merger announcements Advisor: Anja Kunzmann Empirical topic Motivation: Investor inattention has been focus of recent research: DellaVigna & Pollet (2009) assume investor inattention on Fridays, and show a corresponding delay of stock price reactions to Friday earnings announcements. Louis & Sun (2010) build on this and apply the Friday announcement effect to much larger and more complex corporate events: merger announcements. They also find a muted stock price reaction to these announcements. Other distraction factors: Upcoming holidays (Chang & Hsu, 2015), extraneous news (Hirshleifer et al., 2009) Goal of seminar paper: Brief overview of the literature on investor inattention and its stock markets effects. Replication of findings in Louis & Sun (2010), and extension of their work by using a more recent time period and considering further distraction factors. Data: CRSP, Compustat and SDC(access provided). Requirements: We recommend that the candidate should feel comfortable in the use of a statistical software program and econometrics (such as STATA). 13

14 R7: March madness: Investor inattention and earnings announcements Advisor: Anja Kunzmann Empirical topic Motivation: Investor inattention has been focus of recent research: DellaVigna & Pollet (2009) assume investor inattention on Fridays, and show a corresponding delay of stock price reactions to Friday earnings announcements. Hirshleifer et al (2009) find a muted market reaction to earnings announcements when investors are distracted by several announcements on the same day. Drake et al. (2015) suggest that large sports events also redirect investor attention. They find an underreaction of stock prices to earnings announcements that are released during March Madness, and a strong PEAD for these announcements. Goal of seminar paper: Brief overview of the literature on investor inattention and its stock markets effects. Replication of findings in Drake et al. (2015), and extension of their work by using a more recent time period and considering other distracting (sports) events. Data: CRSP, Compustat and IBES (access provided). Requirements: We recommend that the candidate should feel comfortable in the use of a statistical software program and econometrics (such as STATA). 14

15 Final Remarks Visit our website ( There you will find a detailed description of every topic. Pay attention to the deadlines (submission of priority list). Apply only for topics you really want to work on. In case of questions, do not hesitate to contact us. Zorka Simon: zsimon[at]bwl.uni-mannheim.de Michael Ungeheuer: ungeheuer[at]bwl.uni-mannheim.de Anja Kunzmann: kunzmann[at]bwl.uni-mannheim.de 15