Contributions in Merlin

A series of seminal theoretical papers argues that poaching of employees may hamper company-sponsored general training like apprenticeship training in Germany. Empirically however, the existence and extent of poaching still remains an open question. We provide a novel empirical strategy to identify poaching and investigate its causes and consequences. We find that only a few apprenticeship training firms in Germany are poaching victims or raiders. Poaching victim firms are more likely to be in a temporary downturn and raiding firms are more likely to increase their workforce. Poaching victims hardly change their training strategy after poaching. Thus, poaching is a transitory event and not a general threat to apprenticeship training. This is an important result for countries that intend to introduce apprenticeship type of training and need to convince firms to participate in their endeavour.

Many postulated relations in finance imply that expected asset returns should monotonically increase in a certain characteristic. To examine the validity of such a claim, one typically considers a finite number of return categories, ordered according to the underlying characteristic. A standard approach is to simply test for a difference in expected returns between the highest and the lowest return category. However, such an approach can be misleading, since the relation of expected returns could be flat, or even decreasing, in the range of intermediate categories. A new test, taking the entire range of categories into account, has been proposed by Patton and Timmermann (2010). Unfortunately, the test is based on an additional assumption that can be violated in many applications of practical interest. As a consequence, it can be quite likely for the test to ‘establish’ strict monotonicity of expected asset returns when such a relation actually does not exist. We offer some alternative tests which do not share this problem. The behavior of the various tests is illustrated via Monte Carlo studies. We also present empirical applications to real data.

Many bond portfolio managers argue that bond laddering tends to outperform other bond investment strategies because it reduces both market price risk and reinvestment risk for a bond portfolio in the presence of interest rate uncertainty. Despite the popularity of bond ladders as a strategy for managing investments in fixed-income securities, there is surprising little reference to this subject in the economics and finance literature. In this paper we analyze complex bond portfolios within the framework of a dynamic general equilibrium asset-pricing model. Equilibrium bond portfolios are nonsensical, implying a trading volume that vastly exceeds observed trading volume on ¯nancial markets. Such portfolios would also be very costly and thus suboptimal in the presence of even very small transaction costs. Instead portfolios combining bond ladders with a market portfolio of equity assets are nearly optimal investment strategies, which in addition would minimize transaction costs. This paper, therefore, provides a rationale for bond ladders as a popular bond investment strategy.

We develop statistical methods to detect informed trading in options markets. We apply these methods to 31 companies from various sectors over 14 years analyzing approximately 9.6 million option prices. We find that option informed trading tends to cluster prior to certain events, takes place more in put than call options, generates easily large gains exceeding millions,is not contemporaneously reflected in the underlying stock price, involves around the money options during calm times and out-of-the-money options during turbulent times. These findings are not driven by false discoveries in informed trades which are controlled using multiple hypothesis testing techniques.