A new class of risk measures called cash sub-additive risk measures is introduced to assess the risk of future financial, nonfinancial and insurance positions. The debated cash additive axiom is relaxed into the cash sub-additive axiom to preserve the original difference between the numeraire of the current reserve amounts and future positions. Consequently, cash sub-additive risk measures can model stochastic and/or ambiguous interest rates or defaultable contingent claims. Practical examples are presented and in such contexts cash additive risk measures cannot be used. Several representations of the cash sub-additive risk measures are provided. The new risk measures are characterized by penalty functions defined on a set of sub-linear probability measures and can be represented using penalty functions associated with cash additive risk measures defined on some extended spaces. The issue of the optimal risk transfer is studied in the new framework using inf-convolution techniques. Examples of dynamic cash sub-additive risk measures are provided via BSDEs where the generator can locally depend on the level of the cash sub-additive risk measure.
Managers' information disclosure to firm's outsiders plays an essential role for mitigating information asymmetry and agency problems. The main objective of this thesis is to analyze the managers' reporting incentives in a broader context, while considering the preferences of behavioural investors and the active role of financial analysts as target setters in particular. Further, this thesis aims to study the optimal disclosure policy of different firms in the form of guidance and to analyze its influence on the efficiency of analysts’ earnings forecasts.
Overall, this thesis contributes to the broad research on behavioural corporate finance studying the determinants and consequences of managers' decisions when managers and (or) investors suffer cognitive biases and (or) have behavioural preferences. The analysis focuses on the investors' preferences as described in the prospect theory of Kahneman and Tversky (1979) and neglects any cognitive biases that might lead to irrational decisions.
The contribution of this thesis is threefold. First, this thesis contributes to the empirical literature on the relevance of thresholds by showing that reported performance, particularly around the zero target, influences the market value of a firm and in particular the investors' perception of the value generated by intangibles such as R&D investments. Second, the thesis extends the theoretical literature on earnings manipulation by analyzing the managers' reporting incentives in an inter-temporal strategic game with the analysts where the managers' payoff is determined by investors using the analysts' consensus forecast as a target when evaluating earnings reports. Finally, instead of adapting the view that agents suffer some cognitive limitations, this thesis contributes to the literature that seeks economic explanations for the analysts' underreaction by showing empirically that managerial guidance is capable to explain such inefficiencies in the analysts' forecasting behavior.
Behavioral Finance hat bahnbrechende Erkenntnisse zur Psychologie von Investoen hervorgebracht. Sie können helfen, den Prozess der Kundenberatun in Banken zu verbessern.
Die weltweite Finanzkrise hat die Frage aufgebracht, in welche
Richtung die Finance-Theorie weiterentwickelt werden soll,
nachdem einige Ansätze offensichtlich in die Sackgasse geführt
haben. Im folgenden Text fasst ein Finance-Wissenschafter, der
an vorderster «Forschungsfront» tätig ist, erste Erkenntnisse für die Lehre zusammen.
Performance of investment managers is predominantly evaluated against targeted benchmarks, such as stock, bond or commodity indices. However, most professional databases
do not retain timeseries for companies that disappeared, and do not necessarily track the change of constitution in these benchmarks. Consequently, standard tests of performance suffer from the “look-ahead benchmark bias,” where a given strategy is naively back-tested against the assets constituting the benchmark of reference at the end of the testing period (i.e. now), rather than at the very beginning of that period.
We report that the “look-ahead benchmark bias” can exhibit a surprisingly large amplitude for portfolios of common stocks (up to 8% per annum for the S&P500 taken as the benchmark), while most studies have emphasized related survival biases in performance of mutual and hedge funds for which the biases can be expected to be even larger. We use the CRSP database from 1926 to 2006 and analyze the running top 500 US capitalizations to demonstrate that this bias can account for a gross overestimation of performance metrics such as the Sharpe ratio as well as an underestimation of risk, as measured for instance by peak-to-valley drawdowns. We demonstrate the presence of a significant bias in the estimation of the survival and look-ahead biases studied in the literature. A general methodology to test the properties of investment strategies is advanced in terms of random strategies with similar investment constraints.
