Contributions published at Financial Economics (Thorsten Hens)

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Value-Investoren handeln, wenn der Kurs einer Anlage von ihrem Wert abweicht. Ihr Ansatz ist erfolgreich, braucht aber starke Nerven und Geduld.

Buy & Hold ist der einfachste Anlagestil. Es basiert auf der Hypothese effizienter Märkte. Die Strategie geht aber nur auf, wenn nicht alle danach handeln.

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The futures curve of an aggregate commodity portfolio is time-varying and changes from upward (contango) to downward sloping (backwardation) which implies negative or positive expected returns. The basis arises as a natural fundamental to predict commodity returns. However, the empirical evidence at the aggregate portfolio level is very weak. I construct a factor based on different forward rates along the futures curve and find that commodity returns are predictable. Economic fundamentals, such as industrial production or global trade, positively predict aggregate commodity returns and used jointly with this forward rates factor significantly improve overall predictability in- and out-of-sample. I find evidence that expected aggregate commodity returns are procyclical. When economic activity is high, the commodity yield curve tends to be inverted and expected returns are high.

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Identifying economic regimes is useful in a world of time-varying risk premia. We apply regime switching models to common factors proxying for the macroeconomic regime and show that the ensuing regime factor is relevant in forecasting the equity risk premium. Moreover, the relevance of this regime factor is preserved in the presence of fundamental variables and technical indicators which are known to predict equity risk premia. Based on multiple predictive regressions and pooled forecasts, the macroeconomic regime factor is deemed complementary relative to the fundamental and technical information sets. Finally, these forecasts exhibit significant out-of-sample predictability that ultimately translates into considerable utility gains in a mean-variance portfolio strategy.

Die rund 160 Teilnehmer des Vermögensaufbaugipfels informierten sich in 14 Vorträgen und Diskussionen mit Experten über die Chancen und Herausforderungen der Kapital- und Immobilienmärkte.

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Experimental evidence shows that risk tolerance for future prospects is higher than for immediate ones, which can have profound implications for many aspects of life. The Missing-Link Model by Epper and Fehr-Duda (2015) explains higher risk tolerance for future prospects by the risk inherent in the future in conjunction with people’s proneness to Allais-type common-ratio violations. The latter is a characteristic of probability weighting and constitutes preference reversals for a pair of prospects as a consequence of scaling down the probabilities p of the best outcomes. Future risk, which reduces the probability of prospect survival, shifts the probability weighting function upwards and thereby increases risk tolerance. Moreover, the reduced curvature of the weighting function implies a decreasing proneness to common-ratio violations. The purpose of this thesis is to examine several predictions of the Missing-Link Model by means of a laboratory experiment with monetary incentives. The task of the subjects was to determine the sure amount payable at time t that was considered as being equivalent to the risky prospect paid out at t. Although the study does not provide evidence of increased risk tolerance for future prospects, the results support several other predictions of the model. There is evidence of increased risk tolerance for future prospects with p = 90% and p = 10% when the future is perceived as more uncertain. This impression was conveyed by a priming manipulation. The manipulation check suggests that future risk may stem from mistrust of other people which makes people feel that future prospects are less likely to survive. Further results indicate that the valuation of delayed prospects with p = 50% is higher when the final outcome is revealed at the payment date rather than immediately. Moreover, there is evidence that risk tolerance for future prospects with p = 90% increases with the degree of departure from linear probability weighting. The results for the sample of prospects with all levels of p indicate that risk tolerance increases with future risk and the departure from linear probability weighting. Therefore, the Missing-Link Model can make important contributions to theories of decision making.

Many people like to watch the news on the television in the evening or even follow the news throughout the day. News is an interesting phenomenon to followers because there is something uncertain (game result, weather report etc.) which will be partly or even fully resolved. Uncertainty is an important part of everyone's life and almost every important decision has some kind of an extreme event involved. Let's take a day of skiing for example. Most people would not think about getting caught in an avalanche, however after a day of skiing one does sometimes hear exactly that happened somewhere. Alternatively let us think about the wedding day. Most people already think about the uncertainty which will resolve after the marriage: will the married couple stay together in their first years? In both cases, there is an extreme event involved, which has a great impact on a person's life. After all, most people overestimate the event of the divorce and underestimate the event of getting caught in an avalanche. The underestimation of rare extreme events may lead to underinsurance in the population. This paper will present an explanation of the underinsurance puzzle, based on the resolution of the uncertainty and the timing of the consequence. An experiment was conducted to test the existing literature. It verifies probability weighting functions if the consequence is immediate, and validates the more complex Missing-Link Model, when a time component is involved. The paper also presents direct improvements on how low probability, high impact events should be presented to subjects, through experience sampling. This would result in people being more rational.

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We show that the optimal asset allocation for an investor depends crucially on the decision theory with which the investor is modeled. For the same market data and the same client data different theories lead to different portfolios. The market data we consider is standard asset allocation data. The client data is determined by a standard risk profiling question and the theories we apply are mean–variance analysis, expected utility analysis and cumulative prospect theory. For testing the robustness of our results, we carry out the comparisons for alternative data sets and also for variants of the risk profiling question.

We propose to use the terms Verfügungsmacht (power to dispose, analogous to possession) and Verfügungsrecht (right to dispose, analogous to ownership) to discern whom a Bitcoin belongs to in case of a bankruptcy. Using the example of Tezos, we demonstrate that the storage location of private keys alone does not suffice to meaningfully answer the question to whom the foundation's assets belong. Instead, the context and the contractual arrangement, from which the right to these assets can be derived, also need to be taken into account. This view provides a legal basis for the storage of Bitcoins on behalf of a client without taking them onto one's balance sheet, ensuring that the client's assets are not included in the bankruptcy estate. Furthermore, we classify the Internet currency Bitcoin as a rival, fictive, intangible asset sui generis and opine that there is a gap in the law regarding Aussonderung (removing an asset from the bankruptcy estate and returning it to the rightful owner) and Admassierung (adding an asset to the bankruptcy estate from a third party) of Bitcoins. Courts and bankruptcy administrators are encouraged to fill this gap in accordance with article 1 of the Swiss Civil Code when faced with Bitcoins in a bankruptcy case.

Die Blockchain-Szene hat ein Transparenz-Problem: Wenn Finanzierungen mittels Initial Coin Offering (ICO) durchgeführt werden, ist nicht immer klar, wer dahinter steckt und welche Ziele verfolgt werden. Eine neu gegründete Ratingagentur für Blockchain-Assets will hier Abhilfe schaffen. Heute ist die Demo-Version der Alethena-Plattform gestartet. Die erste Version der Plattform bereitet laut einer Mitteilung «detaillierte und transparente» Informationen zu ICOs auf und ermögliche damit eine faktenbasierte Investitionsentscheidung. ICOs werden auf einer Skala von eins bis zehn bewertet. ICOs, die eine Investment-Grade-Klassifizierung erhalten, haben ein Rating zwischen sieben und zehn.

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