Research

Motivated by the idea to understand our current financial system and to contribute to a sustainable world, I investigate during my PhD questions regarding the subject of Sustainability and Financial Economics.

Publications

Asset Pricing - Finanzderivate und ihre Systemrisiken

Textbook for Undergraduate students on the subject of asset pricing and systemic risk. With M. Chesney, B. Maranghino-Singer, and L. Münstermann – Springer Link

Dieses Buch gibt eine vielseitige Einführung in die Welt der Finanzderivate. Es richtet sich insbesondere an Studenten der Wirtschaftswissenschaften, bietet aber auch interessierten Drittpersonen einen verständlichen Einstieg in die Thematik. Derivative Produkte sind allein schon aufgrund des enormen Volumens essentiell im heutigen Wirtschaftssystem. Dieses Buch behandelt sowohl die Funktionsweisen als auch die Einsatzmöglichkeiten der elementaren Derivate. Der theoretische Teil wird zudem jeweils mit Übungen abgerundet. Die Finanzkrise 2007/2008 hat jedoch gezeigt, dass mit diesen Produkten bisher unbekannte Systemrisiken verbunden sind. Deshalb betrachten wir Derivate auch aus einer kritischen Perspektive und analysieren damit verbundene Konzepte des aktuellen Wirtschaftssystems, wie zum Beispiel die Bedeutung von Wachstum. Konkrete Beispiele helfen dabei diese abstrakte Dimension besser zu verstehen.

Insbesondere die beiden folgenden Kapitel tragen meine Handschrift:

  • Kapitel 2: Funktionen und Dysfunktionen von Finanzmärkten
  • Kapitel 7: Der Finanzsektor und seine Derivate als Motor des Wachstums?

Working Papers

Low Interest Rates, Bounded Rationality, and Product Complexity: Demand and Supply Effects for Retail Financial Markets

with M. Chesney (University of Zurich) and F. Fattinger (University of Melbourne) – SSRN

This paper studies the market for yield enhancement products (YEPs). We document a substantial increase in volumes, followed by a striking rise in product complexity. This pattern is paralleled by sharply falling and plateauing interest rates. We experimentally show that, while decreasing interest rates increase individuals‘ willingness to bear risk, it is their risk misestimation that creates demand for more complex products. By analyzing 4,460 issued YEPs, we find that (i) issuer margins are increasing in product complexity, (ii) average investment returns are negative, (iii) product complexity appears driven by supply competition and caters to investors‘ bias in perceiving dependencies.

Presented at: RBFC (2018), North American Experimental Finance Conference (2020), University of Zurich, University of Melbourne

Mutual Funds and Qualitative Disclosure: Information Content of Fund Prospectuses

with T. Schäfer (University of Frankfurt) – SSRN

Mutual funds are mandated by the Securities and Exchange Commission (SEC) to disclose information on their investment objectives and risks. In this paper, we study the informational value of U.S. mutual funds‘ qualitative disclosures by analyzing the content of funds‘ prospectuses. First, we find that funds disclosed risks increase with their exposed risk. They inform, in particular, extensively about their idiosyncratic risks and less about their systematic risks. Second, using methods from textual analysis, we document that around one-third of the variation in the content of funds‘ risk disclosures is fund-specific, while a substantial part of a fund’s risk disclosures is determined at the fund group level. Our findings suggest that the relative informativeness in funds‘ prospectuses has been, on average, decreasing over time. Third, we show that regular content-based updates of the disclosed risks provide relevant information in predicting future fund performance. Investors, however, do not react to this new information but rather to the content’s informativeness. Finally, using an event study framework relying on matching techniques, we document that investors also do not respond to the provision of additional simplified disclosure.

Winner of the Swiss Finance Institute Best Paper Doctoral Award 2020

Presented at: PMFC (2019), SFI Research Days (2020), EFA (2020), University of Zurich, University of Melbourne, University of Frankfurt, AFFI (2020),

When Mutual Fund Names Misinform

with A. Allard (KU Leuven) and K. Smedts (KU Leuven) – SSRN

Mutual funds often inform directly about their strategy in their name. This paper studies the accuracy of mutual fund names. Constructing a fund name history data-set based on SEC filings and applying unsupervised machine learning techniques, we document that a significant fraction of mutual funds features an inaccurate name, i.e. a name which is not aligned with their actual investment style. Funds that provide an inaccurate name experienced lower fund inflows before the inaccuracy, underperformed in the year before, and charged higher expenses. Strikingly, after featuring an inaccurate name, funds see a worse risk-return trade-off due to an increased idiosyncratic risk. Finally, we document that investors experience difficulties in responding to this misleading information while at the same time, they do not profit from this deviating behavior of the funds. Thus, our results highlight the importance of regulatory intervention in the name dimension.

Presented at: University of Leuven (2020)

Work in Progress

Mind the Gap: Nudging Investors towards Sustainable Investments

with F. Heeb (University of Zurich)

Sustainable investing is considered as a critical element for tackling global challenges. At the same time, there is a gap between private investors‘ intentions to invest sustainably and their investment decisions. Nudges that subtly influence decision processes of investors could be a promising tool to close this gap. While existing research on sustainable investment decisions considers private investors as a homogeneous group, we show that investment decision processes, and hence adequate nudges, depend on both the wealth level of an investor as well as on the type of investment. We develop a framework to analyze investment processes and show that these processes can be characterized by the available choice options, the frequency of choices and the interaction with financial intermediaries.

Research projects

  • Environmental Effects Around IPOs
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