Banken und Finanzierung

Understanding the Effect of Hedge Fund Activism on the Target Firm – A Qualitative Study on Shareholder Value

Philipp Rittgen, EBS Universität für Wirtschaft und Recht (Masterarbeit)
Junior Management Science 10(1), 2025, 236-266

This thesis represents a qualitative study analyzing a comprehensive interview dataset of long-standing target executives, investment bankers, and activist specialists to improve our understanding of the effects of hedge fund activism on target firms. Hedge funds possess a broad set of tools to alter the firm’s trajectory for long-term value creation or short-term gains that may compromise long-term growth. As such, engagement is shaped by several factors, including the fund’s incentives, fund size, credibility, and geography. Understanding these drivers is vital in comprehending the dynamics of hedge fund activism to increase shareholder value. However, understanding engagement does not directly translate into understanding the consequences for the target firm. Therefore, this thesis provides a theoretical model grounded in shareholder theory that conceptualizes the impact of measures based on their effectiveness to unlock value in the short – or long-term horizon. This research reveals that different measures have distinct temporal implications for value creation, showing that hedge fund activists often advocate for measures aimed at unlocking immediate shareholder value, while the long-term consequences depend upon the alignment with the target firm’s overarching strategy.

Keywords: hedge fund activism; shareholder theory.

DOI: https://www.doi.org/10.5282/jums/v10i1pp236-266

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The Impact of Prospectus Language on IPO Underpricing: A Textual Analysis of European IPOs

Nicolas von Bodman, Technische Universität München (Masterarbeit)
Junior Management Science 9(4), 2024, 1934-1963

This study explores the impact of IPO prospectus language on the prevalent underpricing in European IPOs, using natural language processing techniques. Specifically, it investigates whether a relationship exists between litigious, negative, positive, and uncertain language, as well as the degree of document similarity and IPO underpricing. For this purpose, qualitative text data is converted into quantifiable metrics using modern analysis techniques. The study presents new methodological approaches to textual analysis. The results establish a clear relationship between underpricing and multiple dimensions of prospectus language and highlights unique features of European markets. These include specific disclosure obligations of various market segments and the different listing types available to issuing firms. The results of the variables related to sentiment analysis all reveal significant relationships. However, no robust evidence emerges for variables related to document similarity. Overall, the introduced methodological approaches offer enhanced explanatory power over traditional methods, effectively contributing to the explanation of the underpricing phenomenon in European markets.

Keywords: IPO; NLP; prospectus language; textual analysis; underpricing.

DOI: https://www.doi.org/10.5282/jums/v9i4pp1934-1963

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How Sustainable Is Private Equity? Unlocking the Impact of Private Equity on Asset-Level Sustainability: An Empirical Investigation

Paul Sunzenauer, Technische Universität München (Masterarbeit)
Junior Management Science 9(1), 2024, 1100-1122

The debate over the broader impact of the private equity industry has been a contentious topic in the academic literature. While recently, private equity investors have endorsed sustainability in their investment strategies, little is known whether the industry promotes sustainable transformation. This research uses data from the U.S. Environmental Protection Agency on the emission and handling of toxic chemicals in U.S. factories from 1991 to 2021 as a proxy for facility sustainability. The study reveals that, compared to the overall peer group facilities involved in a private equity takeover reduce pollution by 1.55 %-points less and reduce production waste by 1.1 %-points more in the two years after takeover. Further analysis indicates, that with a higher environmental hazard of the underlying chemicals, both the increase in pollution and the decrease in production waste become more pronounced. The study reveals that private equity ownership does not result in enhanced ecological sustainability. Further, the concurrence of the found trends with generally rising costs of both pollution control and raw materials of higher hazards suggest that the private equity business model is only effective in achieving sustainability goals if those are well aligned with financial objectives.

Keywords: impact of private equity; private equity; SRI; sustainability; sustainable finance.

DOI: https://doi.org/10.5282/jums/v9i1pp1100-1122

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Green Funds and Environmental Disclosure Quality

Katharina Dormann, Humboldt-Universität zu Berlin (Masterarbeit)
Junior Management Science 8(3), 2023, 772-797

I study the association between the selection of a company by a green fund and its environmental disclosure quality. Based on fund holding and environmental disclosure data of companies in the EU between 2017 and 2021 I conduct a descriptive as well as an empirical analysis. I investigate whether the environmental disclosure quality is associated with the selection by a green fund. Literature examines green funds and environmental disclosure quality separately, but the theories discussed allow for the expectation that the green fund selection and the environmental disclosure quality of companies are positively associated. I find that (i) the environmental disclosure quality of green fund investees is higher than of companies which are not selected, and (ii) the environmental disclosure quality increases further after the selection by a green fund, (iii) but this increase does not seem to be due to the selection itself but a trend of increasing environmental disclosure quality. (iv) The results suggest that green funds which rely on environmental disclosures in their selection process tend to select companies with higher environmental disclosure quality than those selected by green funds which use additional data sources besides the disclosures in their selection processes.

Keywords: Environmental disclosures; Green funds; Disclosure quality; Sustainable finance; Fund selection processes.

DOI: https://doi.org/10.5282/jums/v8i3pp772-797

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Private Equity Transactions: Value Creation through Operational Engineering – Evidence from Europe

Victor Heinrich, Technische Universität München (Masterarbeit)
Junior Management Science 8(3), 2023, 634-657

This paper investigates private equity value creation strategies through operational engineering. To examine this, I define a KPI framework typically favored by private equity firms. I apply propensity score matching to a dataset of European PE transactions compared to non-PE backed companies to study value creation. By applying a Difference and Difference regression setting and thereby controlling for two-way fixed effects, I can find strong evidence on PE value creation through operational engineering. This paper adds new insights to academia as (a) there are only few contributions using propensity score matching to examine PE value creation and (b) this paper is the first, to the best of my knowledge, to combine the approach of propensity score matching and Difference in Difference regressions, yielding highly significant results on the relevance of EBITDA margin improvement.

Keywords: Private equity; Value creation; Operational engineering; Propensity score matching.

DOI: https://doi.org/10.5282/jums/v8i3pp634-657

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Determinants and Capital Market Consequences of Net Zero Targets

Samuel Jonas Kaltenhauser, Technische Universität München (Masterarbeit)
Junior Management Science 8(2), 2023, 404-430

Net zero emission – Recently, a frequently cited climate target in the corporate sector. Meeting public pressure, gaining reputation, and optimizing resources are among the core motivations to pursue such a target. Opposed to this stand a high level of complexity and costs. Thus, from an investor’s view, an assessment of profitability can be mixed. Moreover, the risk of greenwashing renders it challenging to assess the sincerity of such a target. The goal of this paper is twofold. First, I analyze which firm and industry determinants might explain net zero target announcements by Russell 1000 listed companies. Second, I measure the capital market reaction by means of an event study and examine the influence of target characteristics defined within a purpose-developed ESG score. The results reveal a significant correlation between a variety of determinants and a net zero target announcement (e.g., industry profile, firm size) and show a significant negative capital market response irrespective of a target’s individual attributes. The latter result indicates a general skepticism of investors towards net zero pledges. I conclude that enhanced external enforcement options and greater transparency by companies regarding their actual target realization plans may reduce this skepticism.

Keywords: Net zero; Carbon neutral; Climate target; Determinants; Capital market consequences.

DOI: https://doi.org/10.5282/jums/v8i2pp404-430

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Passive ownership and long-term orientation around the world

Tobias Ruf, Technische Universität München (Masterarbeit)
Junior Management Science 8(2), 2023, 473-504

The recent growth of passive investors led to concerns regarding their economic impact. This thesis investigates the influence of passive investors on the long-term orientation of their portfolio firms by using global panel data of publicly listed firms from 2000 to 2019. To tackle endogeneity concerns an instrument variable approach with MSCI All Country World Index membership as the instrument is applied. I find that exogenous increases in passive ownership enhance long-term investment in tangible assets, human capital, and organizational capital. While my results suggest that capital expenditures, number of employees, staff cost, and selling, general & administrative expenses are positively connected with higher passive ownership, I find no evidence for an effect on research & development expenses and average staff costs. In additional analyses I find the effect of passive investors to be time-variant and dependent of a firm’s country of origin. My findings suggest that passive investors globally foster long-term orientation in their portfolio firms.

Keywords: Passive investors; Index funds; Long-term orientation; Innovation; Instrumental variables estimation.

DOI: https://doi.org/10.5282/jums/v8i2pp473-504

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Is Cash (the only) King? – Eine kritische Analyse der Aussagekraft von Kapitalflussrechnungen nach IAS 7

Jonas Pütter, Heinrich-Heine-Universität Düsseldorf (Bachelorarbeit)
Junior Management Science 8(1), 2023, 219-236

Die Aussage „Cash is King“ wird häufig getätigt, um eine besondere praktische Relevanz von Cashflow-Größen der Kapitalflussrechnung für den externen Adressaten des Jahresabschlusses hervorzuheben. Cashflow-Größen wird insbesondere eine geringe Beeinflussbarkeit durch Bilanzpolitik zugesprochen und somit eine besondere Eignung als Maß des Unternehmenserfolgs. Im Rahmen dieser Arbeit wird die tatsächliche Aussagekraft von Cashflow-Größen der Kapitalflussrechnung nach IAS 7 eingeordnet. Dazu wird zum einen die Beeinflussbarkeit der Kapitalflussrechnung durch bilanzpolitische Maßnahmen untersucht. Zum anderen wird Literatur betrachtet, welche die Aussagekraft von Cashflow- und Ergebnis-Größen über den Erfolg eines Unternehmens gegenüberstellt. Ein wichtiges Resultat der Arbeit ist, dass Unternehmen durch die Ausübung des Wahlrechtes zur indirekten Darstellung des Cashflows aus betrieblicher Tätigkeit, die Aussagekraft ihrer Kapitalflussrechnung beschränken. Aus diesem Grunde wäre eine Verpflichtung zur Veröffentlichung einer direkten Darstellung des Cashflows aus betrieblicher Tätigkeit wünschenswert.

Keywords: IAS 7; Cashflow; Kapitalflussrechnung; Bilanzpolitik.

DOI: https://doi.org/10.5282/jums/v8i1pp219-236

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An Empirical Analysis of European Credit Default Swap Spread Dynamics

Leon Specht, Leibniz-Universität Hannover (Masterarbeit)
Junior Management Science 8(1), 2023, 1-42

I analyze the dynamics of European credit default swap spreads by estimating CDS spreads via an extension of the structural credit risk models by Black and Cox (1976) as well as Leland (1994), the so called CreditGrades model proposed by Finger et al. (2002). Using two different procedures in approximating the asset volatility surface of obligors, the models are calibrated by means of historical equity volatility and volatility extracted out of at-the-money options. I discover that model performance strongly depends on the distribution of input parameters clustered by economical sectors. Model spreads exhibit significant correlation with market spreads and seem to predict market spreads contingent on sectors and model calibration techniques. The gap between model and market spreads, derived model spreads and empirical market spreads are analyzed by running panel regressions in fashion of Collin-Dufresn et al. (2001) and Bedendo et al. (2011). These show that times of disconnectedness between credit and equity markets, model inherent misspecifications as well as possible market inefficiencies can contribute to the inability to estimate spreads reliably. Robustness checks show that determinants of gap, model and market spreads are sector specific, time varying and tenor dependent.

Keywords: Credit Risk; Credit Risk Modelling; Structural Models; Credit Risk Management; Quantitative Finance.

DOI: https://doi.org/10.5282/jums/v8i1pp1-42

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Blessing or Curse? The Influence of Neobrokers on the Investment Behavior of Young Investors

Maximilian Janussek, Technische Universität München (Masterarbeit)
Junior Management Science 7(5), 2022, 1375-1399

My thesis addresses the topic related to the impact of neobrokers on the investment behavior of investors. I deal with the questions of which target groups are particularly attracted by neobrokers, for which investment strategies neobrokers are primarily used, and to what extent the design of the neobroker applications plays a significant role in the investment decisions of its users. Based on my online-based questionnaire, it can be determined that neobroker customers are predominantly younger and willing to take more risk compared to customers of branch or direct banks. Moreover, neobrokers are used for short-term investments and not for retirement planning. Here, the design of neobroker applications has a decisive influence on the trading behavior of its users. Not only is the risk of shares assessed differently due to the representations of the stock prices within the neobroker applications but buys as well as sells are carried out more frequently using neobrokers than in comparison to traditional broker providers. Ultimately, I also show that a learning section including a knowledge check of the newly acquired financial expertise within the neobroker applications is perceived as helpful by its users as it is for customers of traditional financial service providers.

Keywords: Neobroker; Trading; Fintech; Attention-grabbing.

DOI: https://doi.org/10.5282/jums/v7i5pp1375-1399

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The Idiosyncratic Volatility Puzzle – Anomaly or Data Mining

Leon Kowalke, Leibniz-Universität Hannover (Masterarbeit)
Junior Management Science 7(4), 2022, 945-985

In this study, I investigate the robustness of the idiosyncratic volatility puzzle to the configuration of the research design. Using the regression- as well as the portfolio-based concept, I start with the replication of the idiosyncratic volatility puzzle approving the findings of Ang et al. (2006). However, when idiosyncratic volatility is estimated from monthly data and a time window spanning 1 or 5 years, the puzzle vanishes, regardless of the research method employed. Similar result hold if only stocks with a market capitalization above the cross-sectional median or those with a price higher than 10$ are used. Independent of the weighting scheme, the puzzle is also absent in the regression-based context when the risk premia are estimated by generalized least squares weighting returns by the inverse of their variance estimates. The same finding is derived in the portfolio-based context by extending the holding period to 12 months or controlling for the past month maximum daily return.

Keywords: Idiosyncratic Volatility; Cross-section of stock returns; Predictability; Risk Premium; Robustness.

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Exploring How Macroeconomic Factors Affect REITs and Evaluating Its Downside Risk – Empirical Evidence From China and the US

Xiaoyu Hu, Technische Universität München (Masterarbeit)
Junior Management Science 7(4), 2022, 874-898

This inductive study explores the process, through which legitimacy is established for financial resource acquisition, by analyzing the accounts of 15 entrepreneurs on their storytelling and fundraising strategies. The findings show that consistent personal storytelling, venture story adaptation, and strategic behavior increase a venture’s chances of receiving financial investments. Taking an entrepreneur-centric perspective in analyzing the practical implementation of cultural entrepreneurship theory, the findings have strong theoretical implications. They suggest extending the model of cultural entrepreneurship to include entrepreneurs’ behavior throughout the resource acquisition process. They further contradict the theory that a venture’s legitimacy only depends on its existing resources, suggesting that it is also based on the venture’s founder’s storytelling skills and behavior. As for practical implications, the findings show that investment decisions are not purely fact-based but influenced by investors’ emotional involvement and the hype around the venture among investors, which are both a consequence of skillful storytelling and strategic behavior. The study illustrates several effective storytelling and fundraising strategies, providing practical examples for each.

Keywords: Equity REITs; Macroeconomic risks; VAR; VaR; GARCH(1,1).

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The Economic Upside of Green Real Estate Investments: Analyzing the Impact of Energy Efficiency on Building Valuation in the Residential Sector

Timo Deller, Technische Universität München (Bachelorarbeit)
Junior Management Science 7(3), 2022, 802-825

The rising sustainability awareness will affect the carbon-intensive European real estate industry and will force it to adapt to meet climate targets. The purpose of this thesis is to examine whether the energy efficiency of buildings plays a role in the valuation of buildings in the residential sector in the Rhein-Main Region in Germany. This is done by looking at the impact of energy performance certificates of buildings on their rent and sales prices. Data from publicly available real estate advertisements for the years 2019-2020 are analyzed using hedonic regression models. The rent market analysis (N = 44 442) finds significant cold rent premiums of 5.82%, 2.04%, 3.06% for A+, A and B rated buildings compared to the reference level of D. Significant warm rent premiums of 3.86% and 1.98% are found for A+ and B rated buildings. No significant discounts are found for buildings rated below D for cold and warm rents. The sales market analysis (N = 31 426) shows significant premiums of 6.81%, 3.14% and 1.52% for A+, A and B rated buildings, a range of indifference with no premiums or discounts for C to F rated buildings and discounts of -1.73% and -8.80% for G and H rated buildings. The results show that high energy efficiency of buildings creates significant value for investors.

Keywords: Real estate investments; real estate valuation; green buildings; energy efficiency; sustainability.

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Analysis of Green Bonds

Tobias Friedrich Fauß, Eberhard Karls Universität Tübingen & University of Nottingham (Masterarbeit)
Junior Management Science 7(3), 2022, 668-689

Issuing its first green federal security in 2020, Germany pioneered a unique twin bond concept to address potential liquidity risks compared to their conventional counterparts. A switch mechanism between green and conventional bonds was introduced that allows debt-neutral sale-and-purchase (switch) transactions by the issuing authority. The main goal of this dissertation is to provide a theoretical model that is capable to explain the effects of this twin bond concept on the pricing of green bonds. For this purpose, a stochastic liquidity premium following a Vasicek (1977) process, a constant green premium and a switch option, which is executed when the green bond price falls below the price of its conventional twin bond, are assumed. The model results confirm that this twin bond concept is a viable solution to mitigate illiquidity-induced costs for the green bonds. The main learning from the model is a potential positive value of the switch option before its execution. This implies that issuers adopting this concept could benefit from lower costs of capital compared to ordinary green bonds without a switch mechanism. For investors holding the green instruments, this implies a reduced exposure to liquidity risks.

Keywords: Green bonds; German twin bonds; green premium; liquidity premium; switch transactions.

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Investigating Market Behavior Correlations between Classified Tokens using the International Token Classification Framework

Felix van Walbeek, Technische Universität München (Bachelorarbeit)
Junior Management Science 7(2), 2022, 524-542

A social enterprise is a company founded by a social entrepreneur following a social purpose. Inter-organizational relations of social enterprises are an important topic in research on social entrepreneurship. The aim of this paper is to provide an overview regarding these relations in the context of a literature review. The findings are seperated into the following three cooperation phases: initiation, process and outcomes of social enterprises‘ inter-organizational relations. Furthermore, insights about the functions of network management are collected. The findings show that the most articles focus on the cooperation process and strategic networks are examined most often. In addition, it could be observed that cooperative alliances with other organizations play an important part in social entrepreneurial practice. Inter-organizational relations of social enterpises represent a promising topic for future research. Research about aspects concerning the initiation phase and the outcomes of these relations is especially required. The functions of network management need to be further examined in this research context as well.

Keywords: Blockchain; token; correlation; classification; Bitcoin.

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Carbon Risk in European Equity Returns

Fabian Alexander Meyer, Universität Wien (Masterarbeit)
Junior Management Science 7(2), 2022, 429-454

Investors perceive climate change and the volatility of asset prices caused by the ongoing low carbon transition of the economy, so-called carbon risk, to have an impact on their portfolio performance. However, the extent of carbon risk’s impact on asset prices is still largely unknown. This paper provides a comprehensive quantification of carbon risk in European equity prices and examines whether it constitutes a systematic risk factor. I construct a carbon risk factor to determine the unique share of return attributable to differences in carbon intensity. During the sample period less (more) carbon intensive firms offer higher (lower) returns, which leads to a significant positive return of the carbon risk factor. Moreover, the carbon factor is significantly related to the sample covariance matrix of returns and offers a carbon risk premium in the cross-section of returns. In combination with the enhanced explanatory power relative to standard asset pricing models, this indicates that carbon risk constitutes a systematic risk factor. Consequently, investors can estimate carbon risk exposures based on widely available stock returns and include stocks without explicit carbon emission information in their risk management and investment process.

Keywords: Carbon risk; carbon risk factor; factor model; asset pricing.

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Survival Analysis: Eine Untersuchung von Covid-19 Patientendaten

Akira Karimkhani, Freie Universität Berlin (Bachelorarbeit)
Junior Management Science 7(2), 2022, 338-353

Keywords: Covid-19; Cox-Regression; CPH-Model; Proportional Hazards Model; Survival Analysis.

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Backtesting the Expected Shortfall

Konstantin Spring, Universität Konstanz (Masterarbeit)
Junior Management Science 6(3), 2021, 590-636

Backtesting of risk measure estimates is an integral part for an effective risk management. With the growing importance of the Expected Shortfall (ES) to potentially replace the Value at Risk (VaR) as a primary measure for market risk this also calls for suitable backtesting solutions. Although a variety of approaches has been proposed in the past, there is still an on-going discussion whether the ES can be properly backtested. The thesis adds to this discussion in the following way. Five of the most promising backtests for the ES are implemented, compared based on theoretical properties like empirical size and power and tested against ES estimation models which are fitted to historical returns of the S&P 500. In addition, all backtests in scope are assessed against a set of criteria which reflect their practical applicability for both regulators and financial institutions. Results presented within this thesis confirm that backtesting the ES is indeed not much more complicated than backtesting the VaR. Backtesting ES might be conceptually less straight forward, but there are multiple promising approaches which allow for a reasonable validation of ES estimation models.

Keywords: Expected shortfall; backtesting; risk measures; statistical test.

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The Role of the European Central Bank in a Sustainable Financial System

Nele Braun, University of Applied Sciences Darmstadt (Bachelorarbeit)
Junior Management Science 6(3), 2021, 468-488

The Paris Agreement acknowledged climate change as an urgent threat to the planet and human society. To fulfil the aim of
limiting global warming, public and private investments and especially long-term investments are supposed to shift towards
sustainable practices. Given the high investments required to pursue a sustainable financial system, it will be essential to
involve the financial sector, as well as its participants and authorities. This thesis discussed the role the European Central
Bank (ECB) could play in a transition towards a sustainable financial system. First, the framework conditions and the need
for a sustainable financial system were explained, in particular the recent developments like for instance the introduction of
the EU Taxonomy regulation, a classification system for sustainable activities which aims to provide clarity and limit the risk
of green washing. After that, it was outlined how climate-related risks can spread to the financial system and why central
banks are concerned of them. Three links for the relation between climate change and the financial system were identified –
physical risks, transition risks and liability risks. In particular, the impact of climate change on price stability, financial stability
and the portfolio management of central banks were examined. The objectives and the strategy of the ECB were described,
to establish a base for the subsequent analysis of their instruments. Furthermore, the European Green Deal, an answer of the
European Union to the challenges caused by climate change was presented.

Keywords: Sustainable finance; green finance; central banking; sustainability.

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Varianzrisikoprämien auf deutsche Staatsanleihen

Burak Sarac, Karlsruher Institut für Technologie (Bachelorarbeit)
Junior Management Science 6(2), 2021, 370-392

Volatilität und damit verwandt die Unsicherheit an den Finanzmärkten hat eine besonders wichtige Rolle. Varianzswaps eignen sich für das Handeln mit dieser und haben tiefgehende Erkenntnisse in vielen Märkten ermöglicht, vor allem die der Varianzrisikoprämie. Forschungen auf den Staatsanleihenmärkten kommen jedoch zu kurz, weshalb sich diese Arbeit zum Ziel genommen hat, die Forschung in diese Richtung zu erweitern. Dies wird erlangt anhand von zwei wesentlichen Gesichtspunkten: Zum einen wird ein Vergleich der Anleihenvarianzrisikoprämie auf europäischer Ebene ermöglicht, da neben dem deutschen Staatsanleihenmarkt auch die französischen und italienischen betrachtet werden. Zum anderen werden zwei unterschiedliche Strukturierungsweisen von Anleihenvarianzswaps betrachtet. Während eines davon eher auf theoretischer Basis von Bedeutung ist, wird eine andere Bildungsweise vorgestellt, welches sich für die praktische Umsetzung eignet. Die Ergebnisse dieser Arbeit zeigen, dass die Varianzrisikoprämie in den deutschen sowie europäischen Staatsanleihenmärkten existent ist. Durch eine Short-Position in diesen Varianzswaps lassen sich attraktive Renditen generieren, wobei sich diese nicht nur zwischen den Ländern, sondern auch zwischen den Strukturierungsweisen stark unterscheiden.

Keywords: Varianzswaps; Volatilität; Varianzrisikoprämium; Staatsanleihen; modellfrei.

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Modern Approaches to Dynamic Portfolio Optimization

Philipp Schiele, Ludwig-Maximilians-Universität München (Masterarbeit)
Junior Management Science 6(1), 2021, 149-189

Although appealing from a theoretical point of view, empirical assessments of dynamic portfolio optimizations in a mean-variance framework often fail to reach the high expectations set forth by analytical evaluations. A major reason for this shortfall is the imprecise estimation of asset moments and in particular, the expected return. This work levers recent advancements in the field of machine learning and employs three types of artificial neural networks in an attempt to improve the accuracy of the asset return estimation and the expected associated portfolio performances. After an introduction of the dynamic portfolio optimization framework and the artificial neural networks, their suitability for the considered application is analyzed in a two asset universe of a market and a risk-free asset. A comparison of the corresponding risk-return characteristics and those achieved using a more traditional exponentially weighted moving average estimator is subsequently drawn. While outperformance of the artificial neural networks is found for daily and monthly estimated returns, significance can only be established in the latter case, especially in light of trading costs. Multiple robustness checks are performed before an outlook for subsequent research opportunities is given.

Keywords: Portfolio optimization; machine learning; multilayer perceptron; convolutional neural network; long short-term memory.

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The Value of CSR in Times of Increased Policy Uncertainty: Evidence from the Brexit Referendum

Olivia Hohlwegler, University of St Andrews (Masterarbeit)
Junior Management Science 6(1), 2021, 1-24

Scrutinising the 2016 Brexit Referendum, this paper examines the impact of economic policy uncertainty on the relationship between corporate financial performance and CSR using a sample of 320 non-financial firms listed at the London Stock Exchange. The sample covers the period of 2014 to 2018 with 2016 marking increased, and 2017 and 2018 representing years of moderated policy uncertainty. Using cross-sectional regression analysis of shock-period buy-and-hold returns, this paper finds (I) a statistically and economically significant inverse relationship between reservoirs of social capital previously accrued through CSR initiatives and returns. The effect is driven by the Governance component of CSR, whereas the impact of combined Environmental and Social pursues was not found to be meaningful. Using difference-in-difference methodology with continuous treatment, this investigation concludes (II) high-CSR and low-CSR firms do not differ in terms of sensitivity to adverse Brexit shock implications on operating performance, profitability, financial health, and firm value. Further, (III) effects of CSR on aforementioned aspects of real performance were not found to vary alongside levels of policy uncertainty.

Keywords: Brexit referendum; CSR; ESG investing; policy uncertainty.

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Impact of Weather on the Stock Market Returns of Different Industries in Germany

Astrid Schulte-Huermann, WHU – Otto Beisheim School of Management (Bachelorarbeit)
Junior Management Science 5(3), 2020, 295-311

Weather affects people’s mood, according to psychological studies. For example, low temperature can cause aggression, whereas high temperature can induce apathy. Therefore, it may be possible that weather-influenced mood, driven by mood’s impact on decision-making, exerts an influence on investment decisions and risk-taking behaviour. Thereby, it might also impact stock market returns. I examine market returns of nine industries in Germany. Empirical results illustrate two findings. First, a statistically significant, negative correlation between market returns and temperature, second, a different effect of weather on industrial sectors is identified. A significant correlation can be found for six out of nine sectors.

Keywords: Stock markets; investor behaviour; weather effect; market returns; decision-making.

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Prospect Theory and Stock Returns During Bubbles

Maximilian Piehler, Ludwig-Maximilians-Universität München (Masterarbeit)
Junior Management Science 5(3), 2020, 262-294

I test the hypothesis that investors evaluate stocks based on the prospect theory value of the distribution of past returns. Because some investors tilt towards stocks with high prospect theory value, these stocks become overvalued and earn low subsequent returns. During bubbles this effect should be stronger, due to rising limits to arbitrage and increased participation of individual investors. I do not find strong support for this prediction in the cross section of returns in U.S. stock markets. In contrast to other variables know to explain returns however, prospect theory value does not lose its predictive power during bubbles. Investors with prospect theory preferences seem to choose stocks whose returns optimally combine low standard deviation with high skewness.

Keywords: Prospect Theory; bubbles; limits to arbitrage; individual investors.

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Analyse des Einflusses nationaler Nachhaltigkeits-Regelungen auf den Unternehmenswert

Florian Rößle, Universität Augsburg (Bachelorarbeit)
Junior Management Science 5(2), 2020, 209-222

Das Ziel der vorliegenden Bachelorarbeit war es zu analysieren, ob es einen messbaren Einfluss auf den Wert börsennotierter Unternehmen gibt, wenn Nationen Gesetze zugunsten der Nachhaltigkeit erlassen. Dafür wurden die wichtigsten Nachhaltigkeits-Regelungen der Länder Dänemark, Frankreich und Deutschland zu verschiedenen Zeitpunkten der Gesetzgebungsverfahren betrachtet und analysiert. Um den Einfluss solcher Ereignisse auf den Wert von börsennotierten Unternehmen messbar zu machen wurde die Methodik der Event Study verwendet. Die Unternehmenswerte wurden über die Veränderung der Aktienrenditen an den Kapitalmärkten mit Hilfe der statistischen Verfahren des Marktmodells und des Fama-French Dreifaktorenmodells geschätzt.

Keywords: Nachhaltigkeit, sustainability, CSR, ESG.

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Measuring the Impact of MiFID II on Information Asymmetries Using Microstructure Models

Erik-Jan Senn, Eberhard Karls Universität Tübingen (Bachelorarbeit)
Junior Management Science 5(2), 2020, 197-208

This paper evaluates the impact of the Markets in Financial Instruments Directive II (MiFID II) regulation on information asymmetries. The microstructure models of Madhavan, Richardson, and Roomans (1997) and Glosten and Harris (1988) are adapted to estimate potential changes in the adverse selection component of the spread. I use trade and quote data of 50 German stocks traded at the Cboe Europe Equities exchange from October 2017 to March 2018. To classify trades in presence of uncertainly about the sequence of trades and quotes within a second, a robust classification method is developed. I find a short-term increase in adverse selection and transaction cost after the MiFID II implementation. A long-term reduction of information asymmetries due to the regulation is indicated and discussed.

Keywords: Market Microstructure; MiFID II / Markets in Financial Instruments Directive II; Information Asymmetry in Limit Order Books; Trade Classification; Financial Market Regulation.

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UX in AI: Trust in Algorithm-based Investment Decisions

Leon Szeli, University of Cambridge and Technical University Munich (Masterarbeit)
Junior Management Science 5(1), 2020, 1-18

This Thesis looks at investors’ loss tolerance with portfolios managed by a human advisor compared to an algorithm with different degrees of humanization. The main goal is to explore differences between these groups (Humanized Algorithm, Dehumanized Algorithm, Humanized Human and Dehumanized Humans) and a potential diverging effect of humanizing. The Thesis is based on prior research (Hodge et al., 2018) but incorporates new aspects such as additional variables (demographics, prior experiences) and a comparison between users and non-users of automated-investment products. The core of thi sresearch is an experiment simulating an investment portfolio over time with four different portfolio managers. Subjects were asked to decide if they want to hold or sell a declining portfolio at five points in time to measure their loss tolerance. A cox regression model shows that portfolios managed by the Humanized Human had the highest loss tolerance. Humanizing leads to higher loss tolerance for the human advisor but to lower loss tolerance for algorithmic advisors within the non-user group.

Keywords: Künstliche Intelligenz; Artificial Intelligence; Behavioral Finance; Behavioral Economics; Human-Computer-Interaction; User Experience; Investmententscheidungen; Nutzervertrauen.

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Der Einfluss digitaler Finanzberatung auf das Anlageverhalten von Privatinvestoren

Carl Justus Nowak, Goethe-Universität Frankfurt am Main (Bachelorarbeit)
Junior Management Science 4(4), 2019, 478-492

Diese Arbeit untersucht anhand vorhandener Literatur wie Robo Advisor das Anlageverhalten und die Portfolioperformance von Privatinvestoren im Vergleich zu konventioneller Finanzberatung verändern. Dabei wird der Einfluss der Empfehlungen von Robo Advisors und konventionellen Beratern bezüglich der Portfoliomerkmale: Nettorendite, Diversifikation und Personalisierung untersucht. Darüber hinaus wird geprüft inwiefern die Anlageempfehlungen vorhandene Verhaltensverzerrungen der Privatinvestoren beeinflussen.

Aus der Betrachtung der konventionellen Finanzberatung folgt, dass diese zwar die Diversifikation von Privatinvestoren stark erhöht, sie aber die Nettorendite der Investoren durch Gebühren negativ beeinflusst. Robo Advisor wirken auf den ersten Blick wie das Allheilmittel zur Verbesserung der Finanzberatung, doch auch sie weisen Defizite auf. Zwar führen typische Robo Advisor eine Wertpapierallokation in Übereinstimmung mit der Kapitalmarkttheorie durch, was zu einer hohen Nettorendite und Diversifikation führt, jedoch ist die durchgeführte Personalisierung bei Robo Advisors häufig mangelhaft. Die Beratung durch Robo Advisor empfiehlt sich daher vor allem für Personen, welchen bewusst ist, dass sie nur eine standardisierte Anlageempfehlung erhalten. Für Privatanleger mit komplexen Finanzstrukturen bleibt eine Beratung durch einen persönlichen Finanzberater daher alternativlos.

Keywords: Robo Advisor; Financial Advice Behavioral Bias; Private Investors.

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Measuring the Impact of Carbon Emissions on Firm Value Using Quantile Regression

Lukas Ferner, Universität Augsburg (Bachelorarbeit)
Junior Management Science 4(3), 2019, 422-432

A fundamental transformation of the global economy towards a low-carbon economy is inevitable in order to achieve the climate targets set by the United Nations. Hence, it becomes increasingly important to understand how firm level carbon mitigation affects the value of a company. The purpose of this thesis is not only to estimate the average relationship between carbon emissions and firm value but to investigate whether this relationship is heterogeneous and thus whether the effect of carbon emission on firm value depends on the value of the respective company. A quantile regression approach with firm value measured as Tobin’s Q as the dependent variable is applied. The estimation outcomes clearly indicate that higher carbon emissions reduce firm value for all quantiles. However, the extent of the effect depends strongly on the value of the respective company suggesting that the value-enhancing effect of reduced carbon emissions is higher for firms with relatively high firm value.

Keywords: carbon emission; firm value; quantile regression.

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Portfolio Optimization and Ambiguity Aversion

Belinda Kellerer, Ludwig-Maximilians-Universität München (Masterarbeit)
Junior Management Science 4(3), 2019, 305-338

This thesis analyses whether considering ambiguity aversion in portfolio optimization improves the out-of-sample performance ofportfolio optimization approaches. Furthermore, it is assessed which role ambiguity aversion plays in improving the portfolio performance, especially compared with the role of estimation errors. This is done by evaluating the out-of-sample performance of the approach of Garlappi, Uppal and Wang for an investor with multiples priors and aversion to ambiguity compared to other portfolio optimization strategies from the literature not taking ambiguity aversion into account. It is shown that considering ambiguity aversion in portfolio optimization can improve the out-of-sample performance compared to the sample based mean-variance model and the Bayes-Stein model. However, the minimum-variance model and the model of naïve diversification, which are both independent of expected returns, outperform the approach considering ambiguity aversion for most of the empirical applications shown in this thesis. These results indicate that ambiguity aversion does play a role in portfolio optimization, however, estimation errors regarding expected returns overshadow the benefits of optimal asset allocation.

Keywords: portfolio choice; asset allocation; estimation error; ambiguity; uncertainty.

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Charakteristika vs. Carry – Outperformance in Devisenmärkten

Tom O. K. Zeissler, Wirtschaftsuniversität Wien (Masterarbeit)
Junior Management Science 4(2), 2019, 265-304

Die optimale Währungsallokation ist eine der Kernfragen des international agierenden Investors. Ich teste in diesem Zusammenhang empirisch den Mehrwert des Portfoliooptimierungsverfahrens von Brandt et al. (2009) im Devisenkontext und vergleiche das Ergebnis mit einer diversifizierten Carry-Strategie und weiteren Benchmarks. Da im Zuge dieses Verfahrens sogenannte Charakteristika als Inputsignale für die Allokation benötigt werden, selektiere ich auf Basis bereits vorhandener Literatur zur Prädiktabilität von Währungsrenditen die Faktoren Carry, Momentum, realer Wechselkurs, Leistungsbilanzsaldo, Produktionslücke und Volatilität und untersuche die Performance der auf Basis dieser Signale generierten Portfolios über den Zeitraum von Anfang 1990 bis Ende 2017. Ich finde die stärkste Evidenz für Carry, aber auch Momentum, der reale Wechselkurs und der Leistungsbilanzsaldo wirken mitunter als Signal für die Allokation der optimalen Portfoliogewichte interessant. Ebenfalls kann ich feststellen, dass die Profitabilität beinahe aller untersuchten Strategien maßgeblich vom gewählten Anlageuniversum abhängt, wobei bei gegebener Datenverfügbarkeit eine breite Definition mit Industrie- und Entwicklungsländern zu bevorzugen ist. Des Weiteren kann ich teils interessante Diversifikationseigenschaften und positive Wechselwirkungen zwischen den Charakteristika dokumentieren, welche sich durch Kombination mittels des gewählten Optimierungsansatzes realisieren lassen. Auch stelle ich fest, dass Transaktionskosten im Schnitt einen wesentlichen negativen Einfluss auf die Renditen der Strategien haben. Die Sensibilisierung des Verfahrens durch Inklusion eines entsprechenden Transaktionskostenterms führt jedoch zu einer Performance-Regeneration.

Keywords: quantitative easing; unconventional monetary policy; asset purchase program; credit default swaps; corporate sector purchase program.

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Does Subordinated Debt Discipline Banks? Empirical Evidence of Market Discipline in Europe

Daniel Schürk, Johann Wolfgang Goethe Universität (Bachelorarbeit)
Junior Management Science 4(2), 2019, 228-240

This thesis provides a differentiated answer to the question whether subordinated debt disciplines bank’s risk-taking behavior. I investigate the conditions and applicability of market discipline through subordinated debt instruments by critically reviewing the state of research. Relating to the regulatory context, I discuss proposals and various empirical studies and find that subordinated debt is an adequate measure to discipline banks under certain conditions.
My own empirical analysis contributes to evidence provided by prior studies and updates them for the European case. I conclude that subordinated debt investors perceive differences in risk between banks and across time and are sensitive to credit ratings and accounting variables at generally higher spread levels compared to senior bonds. Results include that spread is positively sensitive (increases with respect to one standard error) to equity to capital (225 BPS), provision for loan losses (200 to 225 BPS), non-performing loans to equity (400 to 715 BPS) and interest coverage ratio (60 BPS). Spread is negatively sensitive (decreases with respect to one standard error) to ROA (120 BPS) and loan loss reserves (360 to 620 BPS).

Keywords: debt market discipline; bond spreads; subordinated debt; bail-in; bail-out; BRRD; Basel II; Basel III; market monitoring; market influence.

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The Effect of ECB’s Corporate Sector Purchase Programme on CDS Premia – An Empirical Analysis

Silie Homayon Nawabi, Goethe Universität Frankfurt (Masterarbeit)
Junior Management Science 4(1), 2019, 123-150

In response to the intensification of economic crises in the euro area, the European Central Bank (ECB), along with other central banks, has conducted both conventional and unconventional monetary policy. The most recent unconventional measure has been outright asset purchases under the corporate sector purchase programme (CSPP) targeting euro-denominated investment-grade bonds issued by non-financial corporations in the euro area. Using a Difference-in-Differences (DID) approach on a sample of euro-zone data I find that the CSPP initiative has consistently contained credit risk. In contrast, spillover effects to firms not subject to the CSPP policy are limited.

Keywords: quantitative easing; unconventional monetary policy; asset purchase program; credit default swaps; corporate sector purchase program.

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Cryptocurrencies as an Alternative Asset Class

Marius Max Lucas Mayer, Goethe Universität Frankfurt (Masterarbeit)
Junior Management Science 3(4), 2018, 1-29

Bitcoin was the first digital currency to rely on a decentralized peer-to-peer network instead of a trusted third party. This was achieved through Bitcoin’s revolutionary underlying technology based on cryptographic proof: the blockchain. After Bitcoin’s emergence, many other so called cryptocurrencies entered the market and we have seen enormous price increases that promised large returns for early users. The return characteristics of cryptocurrencies have been studied by various scholars and some have even declared cryptocurrencies to be an asset class instead of a digital currency. Due to the fast changes in the cryptocurrency market and the increased importance of other cryptocurrencies than Bitcoin, we believe that research focusing on the financial performance of cryptocurrencies should be renewed on a regular basis. Therefore, with this work we aim to shed light on the return characteristics of cryptocurrencies in relation to traditional asset classes and on the potential of cryptocurrencies to improve portfolio diversification. In addition, we investigate the cryptocurrency market, describe selected cryptocurrencies in more detail and provide an overview of potential technological risks arising with the use of cryptocurrencies. Our results indicate that cryptocurrencies provide large return potentials with high levels of volatility but compared to traditional asset classes provide a higher level ofreturn per level of risk. We also find that selected cryptocurrencies can improve diversification in a cryptocurrency portfolio, as well as in a portfolio of international equity and private equity investments.

Keywords: Alternative Asset Classes, Cryptocurrency, Portfolio Diversification,
Risk-Reward Profile und Cryptocurrency Risks

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Ankereffekt und Risikoprämie anhand einer Crowdfunding-Kampagne

Simon Hux, Universität Zürich (Bachelorarbeit)
Junior Management Science 2(3), 2017, 73-103

Als „Crowdfunding“ wird eine alternative Finanzierungsform bezeichnet, die in den letzten Jahren sowohl im nationalen Rahmen der Schweiz, als auch im internationalen Kontext Wachstumsraten im dreistelligen Prozentbereich aufwies. Die vorliegende Arbeit untersucht die Existenz des Ankereffektes in Form einer unverbindlichen Preisempfehlung und die allfällige Risikoprämie in Bezug auf die Subkategorie des „reward-based Crowdfundings“. Im Rahmen dieser Arbeit wurde eine online-basierte, experimentelle Befragung durchgeführt. Mittels einer mehrfaktoriellen univariaten Varianzanalyse konnte gezeigt werden, dass der Ankereffekt – zumindest im Fall der Personen, die am Experiment dieser Arbeit teilgenommen haben – im Bereich des reward-based Crowdfundings auftritt und der Effekt nach Cohen als stark einzustufen ist. Weiter zeigt die im Rahmen dieser Arbeit durchgeführte Studie, dass die Unterstützer einer reward-based Crowdfunding-Kampagne für ihr eingegangenes Risiko entschädigt werden möchten und somit eine Risikoprämie verlangen. Dieser Risikozuschlag kann als Teil der Finanzierungskosten von Crowdfunding-Projekten interpretiert werden.

Keywords: Ankereffekt, Crowdfunding, reward-based Crowdfunding, Risikoprämie

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Investment-Cash Flow Sensitivity – A Focus on the Panel-Data Econometrics Involved

Philip Schnorpfeil, WHU – Otto Beisheim School of Management (Masterarbeit)
Junior Management Science 2(1), 2017, 17-48

I revisit Fazzari (1988) seminal paper on the investment-cash flow sensitivity as a measure of financing constraints and augment their approach with the findings from recent papers. I find that the investment-cash flow sensitivity has decreased and mostly disappeared over time, in line with recent literature. This finding is robust to alternative specifications and a number of robustness checks. I contribute to the literature by explicitly analyzing the strict-exogeneity assumption of the fixed-effects and first-differences estimators in empirical practice. In this setting, strict exogeneity does not hold and the violation can cause substantial inconsistencies.

Keywords: Investment-cash flow sensitivity, Capital market imperfections, Strict exogeneity, Panel data

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Entwicklung eines modifizierten Binomialmodells zur Bewertung von Mitarbeiteraktienoptionen – Bewertungsmodell zur Berücksichtigung der Besonderheiten von Mitarbeiteraktienoptionen und Vergleich mit Angaben der DAX und MDAX-Unternehmen

Benedikt von Bary, Technische Universität München (Masterarbeit)
Junior Management Science 1(2), 2016, 84-117

Die Mitarbeiteraktienoptionen, die Unternehmen ihrem Vorstand gewähren, unterscheiden sich von herkömmlichen Optionen durch bestimmte Einschränkungen und Ausübungsbedingungen. Diese Besonderheiten müssen bei der Ermittlung der erreichten Vergütung berücksichtigt werden. Im Zuge dieser Arbeit wird deshalb ein Verfahren entwickelt, dass es ermöglicht, auf die Herausforderungen bei der Bewertung von Mitarbeiteraktienoptionen einzugehen. Durch die Modifikation eines herkömmlichen Binomialmodells werden verschiedene Ausübungshürden, die Dauer der Vesting Period und Handelsbeschränkungen, denen die Optionen unterliegen, berücksichtigt. Zusätzlich werden auch die frühzeitige Ausübung durch den Vorstand, ein möglicher Verfall der Optionen sowie die rechtlichen Vorschriften des IFRS 2 bei der Bewertung beachtet.
Bei der Konzeption des Modells wurde großer Wert auf die Möglichkeit einer einfachen Implementierung gelegt. Dies unterscheidet das entwickelte Verfahren von den meisten vorhandenen wissenschaftlichen Veröffentlichungen und ermöglicht einen Vergleich der aktienoptionsbasierten Vergütung über verschiedene Unternehmen und Jahre hinweg.
Das vorgestellte modifizierte Binomialmodell erreicht eine Korrelation von über 82% mit den Angaben aus den Geschäftsberichten der DAX- und MDAX-Unternehmen aus den Jahren von 2006 bis 2012. Durch die Berücksichtigung der unterschiedlichen Besonderheiten reduziert sich der Wert der betrachteten Mitarbeiteraktienoptionen um durchschnittlich 35% im Vergleich zu einer Bewertung anhand des Black-Scholes-Modells ohne zusätzliche Anpassungen.

Keywords: Vorstandsvergütung, Mitarbeiteraktienoptionen, aktienbasierte Incentives, Binomialmodell, Corporate Governance

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Variance Risk Premia

Alexander Wahl, Ludwig-Maximilians-Universität München (Masterarbeit)
Junior Management Science 1(1), 2016, 1-33

Using a relatively model-free approach to extract the risk-neutral expected variance from an extensive set of traded options on 29 single stocks and eight stock indices, I derive the variance risk premium defined as the difference between the actually realized variance and the expected variance under the risk-neutral measure. The analysis reveals that variance risk premia are persistently negative for the majority of underlyings and show a clear link to the underlying’s exposure to systematic market variance. Moreover, I find that both the risk associated with continuous as well as discontinuous price movements contribute to observed variance risk premia.

Keywords: Variance risk premium, Volatility premium, Jumps, Risk-neutral, Model-free

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