Spitzenkandidaten im Wahlkampf

This articles investigates the degree to which the image of political candidates can experience change during the campaign, by campaigning on the one hand and by the political coverage of the mass media on the other. Empirical analyses of the Northrhine-Westphalian state election of May 14, 2000, are based on longitudinal survey data for the five weeks before the election and a cross-sectional pre-election study representative of Northrhine-Westphalia. For three effect criteria — first the information the population holds about the leading candidates, second the evaluation of various candidate qualities, and third the weight candidate evaluation carries for the voting decision — it is shown that both effects of campaigning and effects of media coverage on political attitudes and the voting decision can be identified.     

Overconfidence and trading volume

Theoretical models predict that overconfident investors will trade more than rational investors. We directly test this hypothesis by correlating individual overconfidence scores with several measures of trading volume of individual investors. Approximately 3,000 online broker investors were asked to answer an internet questionnaire which was designed to measure various facets of overconfidence (miscalibration, volatility estimates, better than average effect). The measures of trading volume were calculated by the trades of 215 individual investors who answered the questionnaire. We find that investors who think that they are above average in terms of investment skills or past performance (but who did not have above average performance in the past) trade more. Measures of miscalibration are, contrary to theory, unrelated to measures of trading volume. This result is striking as theoretical models that incorporate overconfident investors mainly motivate this assumption by the calibration literature and model overconfidence as underestimation of the variance of signals. In connection with other recent findings, we conclude that the usual way of motivating and modeling overconfidence which is mainly based on the calibration literature has to be treated with caution. Moreover, our way of empirically evaluating behavioral finance models—the correlation of economic and psychological variables and the combination of psychometric measures of judgment biases (such as overconfidence scores) and field data—seems to be a promising way to better understand which psychological phenomena actually drive economic behavior.

Hedge fund liquidity and performance: Evidence from the financial crisis

We investigate how share restrictions affect hedge fund performance in crisis and non-crisis periods. Consistent with prior research, we find that in the pre-crisis period more illiquid funds generate a share illiquidity premium compensating investors for limited liquidity. In the crisis period, this share illiquidity premium turns into an illiquidity discount. Hedge funds with more stringent share restrictions invest more heavily in illiquid assets. While share restrictions enable funds to manage illiquid assets effectively in the pre-crisis period, they seem insufficient to ensure effective management of illiquid portfolios in the crisis. In a crisis period, funds holding illiquid portfolios experience lower returns and alphas, also when share restrictions are controlled for. Funds with an asset–liability mismatch perform particularly poorly and experience the strongest outflows. Share restrictions are also a proxy for incentives as investors cannot immediately withdraw their money after poor performance. We show that higher incentive fees can offset the share illiquidity discount in the crisis period.     

Does Institutional Theory Need Redirecting?

Greenwood, Hinings and Whetten (2014) present two major criticisms of current institutional scholarship, and see need for a broad redirection: institutional organization theory, they argue, has lost sight of the claim to study organizations and, with its overwhelming focus on isomorphism and similarity, has fallen short on adequately theorizing differences across organizations. In our article, we offer support as well as a riposte. First, while we agree that the organizing of collective efforts needs to be at the core of organization research, we warn that focusing on formal organization – a rationalized cultural product itself – may direct attention away from studying alternative modes of organizing, and underestimates the dynamic developments that have transformed contemporary organizations into increasingly complex objects of inquiry. Second, we are concerned that, by abandoning the analysis of similarities in favour of differences, institutional theory may eventually lose sight of its pivotal quest: to study institutions.     

Stable mixture GARCH models

A new model class for univariate asset returns is proposed which involves the use of mixtures of stable Paretian distributions, and readily lends itself to use in a multivariate context for portfolio selection. The model nests numerous ones currently in use, and is shown to outperform all its special cases. In particular, an extensive out-of-sample risk forecasting exercise for seven major FX and equity indices confirms the superiority of the general model compared to its special cases and other competitors. Estimation issues related to problems associated with mixture models are discussed, and a new, general, method is proposed to successfully circumvent these. The model is straightforwardly extended to the multivariate setting by using an independent component analysis framework. The tractability of the relevant characteristic function then facilitates portfolio optimization using expected shortfall as the downside risk measure.     

Economic growth, size of the agricultural sector, and urbanization in Africa

This paper uses variations in international commodity prices and rainfall to construct instrumental variables estimates of the within-country effect that changes in the size of the agricultural sector and GDP per capita growth have on the urbanization rate. For a panel of 41 African countries during the period 1960-2007, the paper’s three main findings are that: (i) decreases in the share of agricultural value added lead to a significant increase in the urbanization rate; (ii) conditional on changes in the share of agricultural value added GDP per capita growth does not significantly affect the urbanization rate; (iii) increases in the urbanization rate had a significant negative average effect on GDP per capita growth.     

Disentangling the link between stock and accounting performance in acquisitions

We study the accounting and stock performance of 4547 US acquisitions during 1989 and 2008. We categorise acquisitions into four types based on the four possible combinations of positive or negative abnormal stock performance and abnormal accounting performance. First, we compare the bidder, bid and target characteristics across the four types of acquisitions. We find significant differences. Second, with the help of existing theories we explain these differences in bidder, bid and target characteristics by differences in the acquisition motives.