The Dynamics of Implied Volatilities: A Common Principal Components Approach

It is common practice to identify the number and sources of shocks that move, e.g., ATM implied volatilities by principal components analysis. This approach, however, is likely to result in a loss of information, since the surface structure of implied volatilities is neglected. In this paper we analyze the implied volatility surface along maturity slices with a common principal components analysis (CPC), known from morphometrics. In CPC analysis, the space spanned by the eigenvectors is identical across groups, whereas variances associated with the common principal components vary. Our analysis shows that implied volatility surface dynamics can be traced back to a common eigenstructure in maturity slices. This empirical result is used to set up a factor model for implied volatility surface dynamics. This revised version was published online in June 2006 with corrections to the Cover Date.     

The UK Financial Sector and Risk Management in PFI Projects: A Survey

In PFI transactions the private companies which take on the obligation to build and manage a facility usually provide only a small fraction of the project's capital requirements. Most of the capital is borrowed from banks and other financial institutions. This poses challenges to financial services providers which often have to retain untypical residual project risks. This article describes the types of risks faced by financial services providers and the strategies they use to cope with these risks. Given the often politically-sensitive nature of PFI projects, the authors suggest that financial institutions should investigate a broader set of parameters than they do at present, which relate directly to the political economy of PFI projects.     

Technical analysis: Novel insights on contrarian trading

We analyze the predictive power of technical analysis with a novel data set based on news sentiment that allows to systematically examine a set of technical analysis indicators over an extensive time period. We do not find much statistically significant relationships with the examined indicators and future asset returns, and we almost do not find any alphas in trading strategies based on technical analysis sentiment. We find evidence for a contrarian-based hypothesis: past market returns and technical analysis sentiment are able to predict future technical analysis sentiment with a negative relationship.     

Flächendeckende Einführung von Smart Metern – Internationale Erfahrungen und Rückschlüsse für Deutschland

Various countries are introducing smart meters in different ways and with different pace. This article reviews the experiences of four European countries that have decided on a complete roll-out of smart meters or have (partly) realised it. In the first part we show theoretically what welfare effects result from different strategies. Afterwards we analyse how these countries have organized a complete roll-out. From this analysis we draw conclusions for the implementation of a full roll-out of smart meters in Germany and derive policy recommendations. It appears that liberalised markets per se do not seem to trigger a roll-out of smart meters. For Germany with its liberalised metering market this may allow the following conclusions: It should be defined clearly what objectives are to be reached by a roll-out. Particularly it should be analysed what costs and benefits are involved when it comes to a complete roll-out of smart meters and if there are potentially any information deficits on the side of energy consumers. On this basis a sound strategy is to be developed.     

Die meistbeachteten Autoren und Werke der Kommunikationswissenschaft

The bibliometrical analysis of papers published in the German journals Publizistik and Medien & Kommunikationswissenschaft between 1970 and 2010 reveals, for the first time, the most cited research and researchers in communication science. The authors present the 57 most cited scholars and the 45 most highly regarded academic works in the discipline. This canon reflects the different theoretical approaches (action theory and system theory) as well as the subsections in the field of communication studies (media effect studies and journalism research). The study also draws some general conclusions about citation traditions in the discipline. In total there has been a rise in the number of citations since the mid-1990s due to the digital turn—electronic databases and especially the internet have greatly improved the accessibility of sources. The citation rate shows a pattern typical for scientific publications: most studies are hardly ever cited—only very few studies are rewarded with numerous citations.     

Exchange rate uncertainty and play nonlinearity in aggregate employment

In a microeconomic model, a band of inaction due to hiring and firing costs is widened by option-value effects of exchange rate uncertainty. Applying an adequate aggregation approach, uncertainty leads to intervals of a weak response to exchange rate reversals—the so-called play areas—on the macro level. If changes go beyond the play area, then suddenly strong reactions (spurts) occur. The width of the play is a positive function of the degree of uncertainty. These nonlinear dynamics are captured in a simplified linearized way in a regression framework. As an empirical application, the exchange rate impacts on German employment are analyzed considering play. Since these mechanisms generally apply to investment cases where an aggregation of microeconomic real option effects under uncertainty is relevant, they may be of a general interest.     

An event of world-wide attraction

This year's Hanover Fair will be held from April 26 to May 5. As a display of technical achievement this fair has attracted world-wide attention and gained general recognition among the growing number of similar events. The number of German and foreign exhibitors, many of them with names known the world over, as well as the still rising flood of visitors are evidence of the Hanover Fair's prominent position, particularly in the sphere of investment goods. In order to learn how this event appears from the point of view of a large-scale enterprise we had a talk with Professor Dr Matthias Schmitt of the Allgemeine Elektricitaetsgesellschaft AEG-TELEFUNKEN about the significance of this year's fair and about some special aspects of fair policy.     

Cooperation under the threat of expulsion in a public goods experiment

In a public goods experiment with the opportunity to vote to expel members of a group, we found that contributions rose to nearly 100% of endowments with significantly higher efficiency compared with a no-expulsion baseline. Our findings support the intuition that the threat of expulsion or ostracism is a device that helps some groups to provide public goods.