Contributions published at Finance (Kjell G. Nyborg)

During the global financial crisis, a detachment of the LIBOR from banks’ borrowing costs led to investigations, revealing severe misreporting of quotes in the fixing methodology. Subsequently, the LIBOR was discontinued and replaced by the SARON in Switzerland. By estimating bank level average borrowing costs of major Swiss banks and applying a Difference-in-Differences model, this thesis analyzes their evolution and drivers. Monetary policy, market risk and the term structure of liabilities significantly influence borrowing costs, while no advantage for too-big-to-fail banks is identified. In addition, SARON is more correlated to the estimated borrowing costs than LIBOR, indicating a better fit.

Enhancing technological capabilities has become integral to a company’s international competitiveness, leading to mergers and acquisitions to access external knowledge of digital technologies. Using the event study method, the post-acquisition performance of acquirers involved in digital mergers and acquisitions in Germany, Switzerland, and Austria compared to the UK is analyzed. The findings suggest that short-term average abnormal returns are significantly positive, while long-term average abnormal returns are significantly negative. Additionally, various performance determinants are considered to evaluate investor reactions to deal announcements. The thesis contributes to the academic knowledge of European digital mergers and acquisitions performance.

The effects of the Corporate Sector Purchase Programme, a quantitative easing measure introduced by the European Central Bank in 2016, is investigated in this paper. A difference in differences approach is used to estimate the effect on eligible bond yields and bid-ask spreads. A decrease in yields and a mixed effect on bid-ask spreads of eligible bonds are observed. However, these findings are not robust to alternative measures of estimation and hence cannot conclusively confirm the findings of previous academic literature.

Many studies exist that have created asset pricing models to explain returns. The impact of industry clustering on factor models has not been explored. By forming Fama and French’s three-factor model, it was found that few industries accounted for over 50% of the observations. Moreover, a few of the 48 industries possessed a positive average return over the sampling period of 366 months between 1963 and 1993. The effect of the average returns of the most represented industries on the explanatory returns of the model could not be accurately captured.

This thesis develops a methodology for venture capital valuation based on two option pricing approaches: "options building blocks" and Monte Carlo simulation. To make this thesis more realistic, we have incorporated provisions related to IPOs, such as IPO return guarantees and vetoes over down-IPOs, using a logit regression model to estimate the likelihood of an IPO exit. According to the results of the model tests, provisions like IPO return guarantees, participation, and liquidation preference significantly increase the value of VC securities. Thus, assuming that all shares are equally valuable as the newly issued preferred shares is highly dangerous and will lead to massive overvaluation.

In this thesis we study the implantation of a Betting Against Beta strategy on the Swiss Equity market. We try to address some of the criticism directed against the methods of Frazzini and Pedersen (2014). We find many indications pointing towards the existence of a low beta anomaly. In total Betting Against Beta achieves mixed results. While we discover high returns, contrary to Frazzini and Pedersen (2014) we fail to find statistically significant alphas. High correlations with other anomaly factors raise questions about the independence of a Betting Against Beta factor.

This study investigates the relationship between ESG performance and firms’ financial value by using two empirical approaches based on the ESG scores: the asset pricing models (Fama French factor model), and the classical event study methodology. First, the ESG-based factor models show that adding separate E, S, and G factors into the factor model increases the explanatory power of the factor model. However, the ESG factor model shows that ‘brown’ firms overperform ‘green’ firms, but the Long-short portfolio strategy of buying the best ESG firms and short-selling the worst ESG firms brings positive cumulative returns. Second, the comparison of stock market reaction to the ESG rating changes before and after the Paris Agreement shows that ESG might be valuable information. However, the market reacts strongly negatively to ESG upgrades and weakly negatively to ESG downgrades after the PA, and the abnormal returns are statistically insignificant. This study, therefore, confirms that ESG can be a risk factor but that its profitability still lacks sufficient evidence.

The monetary policy implementation of the United States Federal Reserve System is a complicated and ever-changing apparatus. This thesis gives an insight into how this system operates through diverse temporary as well as standing facilities and tools and how it tackles crises. After analyzing data provided by the Federal Reserve throughout the past two decades the thesis then tries to draw a conclusion of the changes implemented into this system over this period and exhibit new approaches the Fed takes to implement their monetary policy. The usage of standing facilities changed severely whereas that of temporary facilities remained mostly unaltered.

This paper analyses the effect of several macroeconomic variables on the returns of the Nikkei 225 (N225) Index. Monthly and daily data of the last 18 to 20 years are used. The applied method for the time series data analysis is the EGARCH model. I find that the one-month government bond yield and the earnings have a negative effect on the N225 Index, while the influence of the unemployment rate, industrial production, Yen/USD exchange rate, retail sales and gross domestic product is positive. Remarkably, the consumer price index and the money aggregate have a positive impact on the N225 Index.

This thesis analyzes US IPO data from 2016 to 2021, to see if IPO market figures deviate from average values similar to what was observed over the course of the dot-com bubble. Additionally, the IPOs are classified by industry, sales, and price-sales ratio to test what IPOs are responsible for the deviation on an aggregate level. The results show that in 2020 and 2021, the IPO market is showing clear signs of overheating, mainly caused by high investor demand for IPOs with low sales, indicating that stock markets are currently in an asset pricing bubble.

Central bank purchases under QE programs have the unintended consequence of making some collateral securities more scarce in the market. Such scarcity effects can usually be found in the bilateral repo market, where special repo rates are traded, but prolonged and excessive central bank asset purchases coupled with high a demand for safe assets can also cause a decrease in general collateral repo rates, which in turn reflects the scarcity of the whole class of government bonds. In this dissertation, I study scarcity effects of US Treasuries by investigating the Treasury GCF repo rate. Each $1 trillion purchase of Treasuries by the Fed is associated with a 40-46 basis point decline in the Treasury general collateral repo rate. This suggests moderate general Treasury collateral scarcity effects of quantitative easing in the US.

This thesis presents a detailed analysis of market rationality in the electric vehicle industry by valuing Tesla, and furthermore attempts to find indicators of investor sentiment being the main driver behind the company’s valuation. The stock is valued by applying a discounted cash flow valuation as well as through multiples of comparable companies. Models examining institutional ownership, short interest and the reaction of the market to supposed noise conclude that the estimated overvaluation of approximately 200% could be attributed to investor sentiment and noise traders. In addition,there are indicators pointing towards noise trader risk being present or sophisticated investors ”riding the bubble”.

This thesis examines the effect of leverage on M&A operative performance and analyses post-acquisition leverage dynamics. The study is based on a sample of 1,719 firms and 1,181 acquisitions in the DACH region from 2000 to 2019. The results indicate that overleveraged firms pursue the most performance-increasing acquisitions, are less likely to make acquisitions, and generally decrease their leverage ratio in the acquisition year and in the three following years. Additionally, managers of underleveraged firms, usually increase their leverage ratio in the same period. The thesis confirms the current knowledge of leverage dynamics and performance also in the DACH market and it expands it by considering operative performance metrics instead of the usually implemented stock performance.

Although Special Purpose Acquisition Companies (SPACs) have existed since 2003, such products did not represent a prominent alternative to traditional Initial Public Offerings (IPOs) for a long time, until a veritable boom of such listings took place during the years 2020 and 2021. This master's thesis focuses primarily on this development and tries to explain which factors have led to such an upswing and the imminent decline right after. Because, as will be shown, SPACs represent neither a more cost-effective alternative of going public, nor do they create lucrative share returns for retail investors. SPACs are often advertised as private equity (PE) opportunities for small investors. This will be fundamentally contradicted. The profitability analysis carried out shows that, whilst indeed positive and almost risk-free returns are achieved prior to the execution of a merger deal, these profits are mainly realised by institutional and private equity firms, as well as the sponsors who receive a high promote for the implementation. Limited investment opportunities for such institutions and an uncertain market sentiment linked to the COVID crisis were just some factors that influenced the development on the SPAC market. Mechanisms in the SPAC process are explained theoretically, compared with findings from various papers and finally substantiated with an own data analysis. Wave patterns, as well as deal- and company-specific cross-sectional differences are examined based on data and consistently put into comparison with conventional IPOs. After all, during the peak quarters, about half of all IPOs were attributable to SPACs and thus non-operating shell companies, which is reason enough to examine these structures more closely. Finally, the question arises of how investors can participate on the boom for SPACs and achieve positive returns. For instance, in some cases, redemption rights or the market for warrants provide arbitrage opportunities that can be exploited even by private individuals. But, the concept of SPACs needs to be understood first. Hence, this paper sheds light on this – about how they differ from other alternatives and where advantages and disadvantages of such a complex acquisition and investment form can be found.

This thesis aims to study whether dividend-paying stocks are able to serve as a fixed income generating asset class for long-term investors by enabling them to benefit from both the regular income streams (i.e., dividend payments) and the potential gain from rising stock prices. By building a model portfolio based on firms of the German DAX index, I find unambiguous results: Due to both the capital appreciation and the com-pounding effects provided by the constituents’ dividend payments, the portfolio’s 15-year performance exceeds its benchmarks. For some investors, however, various con-straints like taxes and regulatory restrictions may diminish the true return.

The underlying study investigates the nature of the evolving green bond market, which recently reached one trillion US-Dollar in cumulative issuance and hence grew into a substantial category of the global bond market. Differences in green and conventional bond yields in both the primary- and secondary market are analyzed and classified applying different methodologies. The results suggest a small posi-tive average green bond yield premium in the primary market of +21.09bps and of +1.80bps in the most recent secondary market period. The yield premium narrowed noticeably over the sample period with AAA-rated green bonds exhibiting the tightest yield spread.

Enhanced stock liquidity increases a firm’s propensity to hold cash. This is surprising given the view that improved stock liquidity reduces financial constraints. We propose that firms have a repurchase motive for holding cash. Higher stock liquidity strengthens this incentive. Consistent with this, firms with more liquid stock increase cash holdings relatively more when restrictions to repurchases are eased. The effect of stock liquidity on cash holdings is not influenced by access to credit markets. Our findings suggest that the repurchase motive dominates the real investments motive with respect to the effect of stock liquidity on cash holdings.

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This paper investigates the short-run and long-run performance of 98 Swiss initial public o↵erings (IPOs) during the period 2000-2020. IPOs were divided into three subsamples: 19 private equity- (PE) backed, 12 venture capital- (VC) backed and 67 non-sponsor- (NS) backed firms. The evidence suggest di↵erences across the three groups in terms of first day returns and returns after 12 and 24 months. PE-backed IPOs exhibit lower first-day returns and outperform the Swiss Market Index (SMI) in a 24 months event period. NS-IPOs, on the other hand, exhibit higher first-day returns than PE-backed IPOs and underperform the SMI in 24 months.

This thesis analyzes the effect of macroeconomic factors on the Swiss stock market using a multilinear regression model based on monthly data from March 2003 to December 2018, a period that includes the global financial crisis. Moreover, the time frame is divided into three sub-periods to determine whether the effect of macroeconomic variables depends on the state of the economy. The findings reveal that higher unemployment, a higher EUR-to-CHF exchange rate and higher returns of the DAX 30 Performance Index have a significant and positive effect on returns of the Swiss Market Index. Additionally, both domestic and foreign macroeconomic risk factors play a significant role.