Contributions published at Financial Economics (Thorsten Hens)

This thesis contributes to our understanding of arbitrage-free asset pricing in incomplete markets. In particular, I present a new methodological approach to the empirical estimation of state price densities. I point out that the empirical literature has neglected incompleteness by proposing methods that are aimed to provide unique estimates of state price densities. I propose to characterize arbitrage-free prices through a system of linear inequalities. Under incompleteness, the absence of arbitrage will imply the existence of a multitude of sets of arbitrage-free prices. I will determine boundaries for the arbitrage-free option prices and the distribution of state prices and I will also propose how a unique state price density could be optimally estimated. In a last section I will address the recovery of the pricing kernel and I will show in particular how the hypothesis of a monotonically decreasing pricing kernel should be tested in the presence of market incompleteness. In particular, I do not find supporting evidence for the so-called pricing kernel puzzle.

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The alpha is one of the most used terms in finance. Yet, the alpha is mystical since it has no theory. It is, for example, in contradiction to the standard CAPM with homogenous beliefs. The purpose of this paper is to show that the alpha naturally arises in a financial market equilibrium when the CAPM is extended to heterogenous beliefs. We show that the hunt for alpha-opportunities is a zero-sum game and that alpha-opportunities erode with the assets under management. Moreover, it is shown that a positive alpha is not necessarily a good criterion for the choice between active and passive investment. Finally, we argue that the standard CAPM with homogenous beliefs can be seen as the long run outcome of our model when investors' expectations are linked to the trading success.

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Diese Bachelorarbeit befasst sich mit den Analystenempfehlungen für den Schweizer Aktienmarkt. Täglich sind in den Finanzmedien zu jeglichen Unternehmen Kommentare und Empfehlungen von Analysten zu finden. Bei der Meinung, ob solche Analystenempfehlungen viel wert sind, scheiden sich die Geister. Verwenden die Analysten beispielsweise die richtigen Parameter, wie Eigenkapitalkosten und Gewinnwachstum, um die Unternehmen korrekt bewerten zu können? Diese Arbeit soll aufzeigen, ob ein Investor durch das einfache Befolgen von Analystenempfehlungen eine Überrendite gegenüber dem Markt erzielen kann.

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This thesis analyzes the interdependence between search query volumes and the bitcoin price and examines the search query volumes predictive properties to implement a profitable bitcoin trading strategy. A special focus is given to the, by the academic world, neglected and highly influential bitcoin superpower China. The findings of this paper show not only the connection between search-engine data with the bitcoin price, but reveal the anticipatory characteristics of search query data. Thus, allowing for the implementation of market-outperforming trading strategies – supporting the results of prior studies that argue that the bitcoin market is driven significantly by speculation. Chinese search query volumes yielded better anticipatory properties to outperform the market than their counterparts from Google.

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Abstract This study investigates the effect of anticipated and unanticipated Federal funds target rate (FFTR) changes on the stock returns of Real Estate Investments Trusts (REITs) using daily stock returns over the period 1989 to 2008. For this purpose, the event study methodology is applied to determine abnormal returns around the date when a decision upon the FFTR was made. The results indicate that, on average, an unexpected decrease in the FFTR yields positive abnormal returns, whereas an unexpected increase in the FFTR leads to negative abnormal returns. Further, the results seem to imply that the absolute magnitude of the average abnormal returns increases with a REIT’s size. In contrast, expected FFTR shocks do generally not contribute to significant abnormal returns.

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