Asset management in an inflationary environment—Are commodities a useful hedge?

The 2008 German investment act now allows insurers to buy commodities. Taking the perspective of a German investor and using techniques of cointegration analysis this paper aims to investigate whether commodity investments can be a useful hedge against inflation. A financial asset can only be considered to be a hedge against inflation if its price is cointegrated with the general price level. The results of the study seem to imply that commodity investments may be considered as a hedge against inflation for German insurers, but only to a limited extend.     

New entrepreneurial ventures in a globalized world: The role of market orientation

The present study examines the performance consequences of a market orientation for new entrepreneurial ventures in a globalized world. We show that market orientation indeed positively impacts the performance of new entrepreneurial ventures, regardless of their geographical setting. While market orientation turns out to be a general success factor in a globalized world, the strength of the performance relationship however is contingent to the national culture as one major differentiator between geographical settings. The effect turns out to be stronger in collectivist and high uncertainty avoidance cultures. Findings are derived based on large samples with German and Thai new entrepreneurial ventures. Partial least square is applied as the method of analysis.

The arrival of the Euro and its implications for Asia

The third stage of the European Economic and Monetary Union (EMU) commenced on January 1, 1999 with the launch of the European single currency, the euro. The first round of participants comprises 11 of the 15 European Union (EU) nations, dubbed “Euroland.” The potential implications of EMU for Asia are immense. The euro's emergence as an international currency and its impact on Asia can be assessed in 3 different domains: (1) as a medium of exchange for Europe's trade with Asia; (2) as a store of value in stocks and bonds in world capital markets; and (3) as part of official foreign exchange reserves of Asian central banks. Our analysis suggests that there is potential for the euro to play a bigger role in EU-Asia trade links, which will be underpinned by the collective importance of Euroland as a much-enlarged trading and investment partner for Asia. However, in the short term at least, Asian equity markets are unlikely to benefit from significant inflows of capital from the EU as the former have been decimated by the region's financial crisis. As for Asian bond markets, rapid deterioration of sovereign ratings of countries in the region over the past 12 months would make it difficult for Asian companies to raise funds through euro-denominated debt instruments. As for official foreign exchange reserves, the bulk of Asian reserves is currently held in US dollar assets. Judging from Asian trade and debt figures, it seems unlikely that the euro would challenge the US dollar as a reserve currency any time in the near future. Nevertheless, in the longer term, the euro's introduction could make it easier for Asian central banks to diversify their reserves from the greenback to the euro. The internationalization of the euro is likely to happen only gradually, whether in terms of international trade denomination and settlement, denominating international financial assets, or as a reserve currency. Since the magnitude of shock that the single European currency would bring to the international monetary system is still unknown, only very tentative conclusions for the impact on Asian countries can be drawn at this point in time.     

Digitaler Euro: Funktionsweise und kritische Würdigung

Wirtschaftsdienst - Im Oktober 2020 veröffentlichte die EZB das Grundlagenpapier zum digitalen Euro. Es enthält Vorschläge für die Konstruktion der neuen Geldform. Das digitale...     

Are interest rates too low? Empirical evidence and implications for German life insurers

The current financial crisis has reduced government bond yields in Germany, the U.S., the UK and other countries. Low interest rates do create some problems for the European insurance industry. Especially life insurers seem to face some difficulties. The empirical results reported in this paper give support to the point of view that the relationship among German long-term interest rates, consumer price inflation and industrial production has changed significantly in the year 2009. Turning to the important question under which circumstances an increase to interest rates is likely to occur the empirical evidence reported in this paper does indicate that higher inflation rates should be a cause for rising bond yields.     

Market clearing by maximum entropy in agent models of stock markets

We replace the conventional market clearing process by maximizing the information entropy. At fixed return agents optimize their demands using an utility with a statistical tolerance against deviations from the deterministic maximum of the utility which leads to information entropies for the agents. Interactions are described by coupling the agents to a large system, called ‘market’. The main problem in economic markets is the absence of the analogue of the first law of thermodynamics (energy conservation in physics). We solve this problem by restricting the utilities to be at most quadratic in the demand (ideal gas approximation). Maximizing the sum of agent and market entropy serves to eliminate the unknown properties of the latter. Assuming a stochastic volatility decomposition for the return we derive an expression for the pdf of the return which is in excellent agreement with the daily DAX data. The pdf exhibits a power law behaviour with an integer tail index equal to the number of agent groups. With the assumption of an Ornstein Uhlenbeck model for the risk aversity parameters of the agents the autocorrelation for the absolute return is well described up to time lags of 2.5 years.     

After the "Bubble": Valuation of Telecommunications Companies by Financial Analysts

In this article, we present the results of a series of interviews given by financial analysts specializing in the European telecommunications industry. Our objective is to gain an insight into their approaches to analysis and valuation (information sources, valuation methods, determinants of recommendations, etc.). We also consider whether analysts' approaches have changed since the “high‐tech bubble”. We find that today they rely much more on the discounted cash flow analysis method than at the end of the 1990s, when valuation was largely based on multiples. In line with this, analysts have changed their focus from revenue‐oriented measures towards an assessment of profitability and cash flow generation. Further, analysts claim to have become more diligent and more critical in their analysis.