Tagging the triggers: an empirical analysis of information events prompting sell-side analyst reports

In order to fulfill their function as information intermediaries in capital markets, sell-side equity analysts regularly issue updated forecasts on the stocks they cover. Quite often, the publication of (revised) analysts’ reports is subject to certain trigger events such as the publication of annual figures or the announcement of an upcoming merger. In this exploratory study, we develop a two-step procedure to identify the core events that trigger the release of analysts’ reports on companies that constitute the Dow Jones EuroSTOXX50 index during the three-year period from 2004 to 2006. These can be grouped into Financial Disclosures, Corporate Management, Corporate Strategy, Business Activity, Operating Environment and Share. The results suggest that sell-side analysts attach great importance to non-financial information events when transforming their earnings estimates into valuation forecasts and stock recommendations. Additionally, we link the information events identified as reasons of issuance to the summary measures disclosed in the reports in order to investigate the relationship between the report trigger and associated analyst reaction. Our findings indicate that the forecasting activity of sell-side analysts is greatly influenced by forward-looking statements made by management, strategy-related news flow, and non-company-specific information relating to the covered firm’s operating environment.     

Currency momentum strategies

We provide a broad empirical investigation of momentum strategies in the foreign exchange market. We find a significant cross-sectional spread in excess returns of up to 10% per annum (p.a.) between past winner and loser currencies. This spread in excess returns is not explained by traditional risk factors, it is partially explained by transaction costs and shows behavior consistent with investor under- and overreaction. Moreover, cross-sectional currency momentum has very different properties from the widely studied carry trade and is not highly correlated with returns of benchmark technical trading rules. However, there seem to be very effective limits to arbitrage that prevent momentum returns from being easily exploitable in currency markets.     

The impact of Financial Times Deutschland news on stock prices: post-announcement drifts and inattention of investors

In this paper, we analyze the impact of Financial Times Deutschland (FTD) news on stock prices and trading volumes. Based on a sample of all news about German DAX, MDAX, and SDAX companies published in the news section of the FTD between 2006 and 2010, our results show that articles that contain positive (negative) information are associated with significantly positive (negative) abnormal returns and abnormal trading volumes around their publication. Furthermore, our results show an initial underreaction to these articles and subsequent post-publication drift. Based on the inattention hypothesis, we show that high-attention news (proxied by abnormal trading volume) almost instantaneously moves stock prices to their new valuation levels, whereas the price adjustment process takes much longer following low-attention news. Our results also hold within multivariate regressions where we additionally control for stock-specific characteristics (e.g., institutional ownership, size, and price-to-book ratio) as well as other attention-grabbing events (as measured by ad hoc announcements and cover-page news articles). Finally, we show that results primarily hold in the non-crisis period.     

Hook vs. hope: How to enhance customer engagement through gamification

Many digital service providers have adopted gamification to promote customer engagement. Critical questions, however, remain about the most effective way to enhance customer engagement and increase sales by applying gamification. With a research design that combines qualitative and quantitative methods, including the use of objective sales data from a large field study and replication of the findings across different contexts, this study explores how gamification fosters customer engagement. Both field study results and a simulation study reveal gamification principles (i.e., social interaction, sense of control, goals, progress tracking, rewards, and prompts) that promote hope and consequently increase customer engagement and digital sales. Furthermore, we find that hope is more strongly associated with customer engagement than the psychological condition of compulsion, which even exerts a negative impact. This research thus explores how gamification creates value for customers and provides actionable insights for managers to foster hope through gamification as opposed to get customers hooked.     

Private information in currency markets

Using daily abnormal currency returns for the universe of countries with flexible exchange rates, we show local currency depreciations ahead of unscheduled, public sovereign debt downgrade announcements. Consistent with the private information hypothesis, the effect is stronger in lower institutional quality countries and holds after we control for concurrent public information and for publicly available rumors about the forthcoming downgrades. Our results persist when abnormal currency returns are adjusted for global carry and dollar risk factors, world equity and bond returns, as well as local stock market returns. Finally, the currency depreciations are permanent, providing evidence for a link between fundamentals and currency markets.     

Understanding the economic determinants of the severity of operational losses: A regularized generalized Pareto regression approach

We investigate a novel database of 10,217 extreme operational losses from the Italian bank UniCredit. Our goal is to shed light on the dependence between the severity distribution of these losses and a set of macroeconomic, financial, and firm‐specific factors. To do so, we use generalized Pareto regression techniques, where both the scale and shape parameters are assumed to be functions of these explanatory variables. We perform the selection of the relevant covariates with a state‐of‐the‐art penalized‐likelihood estimation procedure relying on L₁‐penalty terms. A simulation study indicates that this approach efficiently selects covariates of interest and tackles spurious regression issues encountered when dealing with integrated time series. Lastly, we illustrate the impact of different economic scenarios on the requested capital for operational risk. Our results have important implications in terms of risk management and regulatory policy.     

Reducing Demand for Litigation in Consumer Disputes—a Randomized Field Experiment with Social Information

It has long been argued that alternative dispute resolution is superior to traditional court litigation. The paper reviews traditional and behavioural arguments and findings for why litigation rates remain high. The paper then reports on a natural field experiment designed to test how to improve disputes between consumers and businesses in Denmark resolution by including social information into the dispute process. The experiment demonstrates that social information significantly affects litigants’ need for litigation, but that the effect on settlement rates is non-significant. The results are discussed along with suggestions for possible future research into improving the willingness to cooperate in consumer disputes.     

The Gender Pay Gap in EU Countries — New Evidence Based on EU-SES 2014 Data

Intereconomics - Gender differences in wages are a persistent pattern in most European countries. This study analyses the earnings divide between men and women and the driving forces behind it in...