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See detailEssays on Monetary Economics and Asset Pricing
Weber, Fabienne UL

Doctoral thesis (2019)

This dissertation consists of three chapters based on three applied theory papers, which all use microfoundations to study mechanisms behind asset prices in the context of monetary policy and financial ... [more ▼]

This dissertation consists of three chapters based on three applied theory papers, which all use microfoundations to study mechanisms behind asset prices in the context of monetary policy and financial stability. Market Fragility and the Paradox of the Recent Stock-Bond Dissonance. The objective of this study is to jointly explain stock prices and bond prices. After the Lehman-Brothers collapse, the stock index has exceeded its pre-Lehman-Brothers peak by 36% in real terms. Seemingly, markets have been demanding more stocks instead of bonds. Yet, instead of observing higher bond rates, paradoxically, bond rates have been persistently negative after the Lehman-Brothers collapse. To explain this paradox, we suggest that, in the post-Lehman-Brothers period, investors changed their perceptions on disasters, thinking that disasters occur once every 30 years on average, instead of disasters occurring once every 60 years. In our asset-pricing calibration exercise, this rise in perceived market fragility alone can explain the drop in both bond rates and price-dividend ratios observed after the Lehman-Brothers collapse, which indicates that markets mostly demanded bonds instead of stocks. Time-Consistent Welfare-Maximizing Monetary Rules. The objective of this study is to jointly explain capital prices, bond prices and money supply/demand. We analyze monetary policy from the perspective that a Central Bank conducts monetary policy serving the ultimate goal of maximizing social welfare, as dictated by a country's constitution. Given recent empirical findings that many households are hand-to-mouth, we study time-consistent welfare-maximizing monetary-policy rules within a neoclassical framework of a cash-in-advance economy with a liquidity-constrained good. The Central Bank performs open-market operations buying government bonds in order to respond to fiscal shocks and to productivity shocks. We formulate the optimal policy as a dynamic Stackelberg game between the Central Bank and private markets. A key goal of optimal monetary policy is to improve the mixture between liquidity constrained and non-liquidity constrained goods. Optimal monetary responses to fiscal shocks aim at stabilizing aggregate consumption fluctuations, while optimal monetary responses to productivity shocks allow aggregate consumption fluctuations to be more volatile. Jump Shocks, Endogenous Investment Leverage and Asset Prices: Analytical Results. The objective of this study is to jointly model leveraging and stock prices in an environment with rare stock-market disaster shocks. Financial intermediaries invest in the stock market using household savings. This investment leveraging, and its extent, affects stock price movements and, in turn, stock-price movements affect investment leveraging. If the price mechanism is unable to absorb a rare stock-market disaster, then with leverage ratios of 20 or more, financial intermediaries can go bankrupt. We model the interplay between leverage ratios and stock prices in an environment with rare stock-market disaster shocks. First we introduce dividend shocks that follow a Poisson jump process to an endowment economy with pure exchange between two types of agents: (i) shareholders of financial intermediaries that invest in the stock market ("experts"), and (ii) savers, who deposit their savings to financial intermediaries (households). Under the assumption that the households and the so called "experts" both have logarithmic utility, we obtain a closed-form solution for the endowment economy. This closed-form solution serves as a guide for numerically solving the model with recursive Epstein-Zin preferences in continuous-time settings. In our extension we introduce production based on capital investments, but with adjustment costs for investment changes. Jump shocks directly hit the productive capital stock, but the way they influence stock returns of productive firms passes through the leveraging channel, which is endogenous. The production economy also has endogenous growth, and investment adjustment costs partly influence the model's stability properties. Importantly, risk has an endogenous component due to leveraging, and this endogenous-risk component influences growth opportunities, bridging endogenous cycles with endogenous growth. This chapter is part of a broader project on financial stability. Future extensions will include an evaluation of the Basel II-III regulatory framework in order to assess their effectiveness and their impact on growth performance. [less ▲]

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See detailTHE INFLUENCE OF FAMILY OWNERSHIP ON M&AS AND INNOVATION
Issah, Abdul-Basit UL

Doctoral thesis (2019)

I draw from the concept of mixed gambles to investigate the socioemotional wealth trade-offs associated with high risk strategic decisions such as firm acquisition decisions of family firms. We contrast ... [more ▼]

I draw from the concept of mixed gambles to investigate the socioemotional wealth trade-offs associated with high risk strategic decisions such as firm acquisition decisions of family firms. We contrast the predictions from mixed gambles with those of the commonly used behavioural agency model (BAM). Our empirical results for a panel data set of large U.S. firms support the mixed gambles predictions and reject those derived from BAM. They reveal that family firms are more likely to engage in horizontal acquisitions than non-family firms and that the engagement of family firms in horizontal acquisitions is even higher when they are in a gain frame. [less ▲]

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See detailEmpirical Essays on Institutional Determinants of Firm Entry and Exit
Murmann Geb. Wagner, Simona Christine UL

Doctoral thesis (2019)

This thesis is a collection of three essays investigating unintended and non-obvious effects of economic policy changes and established institutional systems on firm entry and exit. The first essay ... [more ▼]

This thesis is a collection of three essays investigating unintended and non-obvious effects of economic policy changes and established institutional systems on firm entry and exit. The first essay investigates the effect of personal preferences of insolvency trustees and judges on insolvency outcomes in Germany. The second essay reveals that governmental wage setting through minimum wages will not only affect dependent employees but also self-employment. In the third essay, introduction of high-speed internet effects on firm entries and exits are analyzed. [less ▲]

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See detailEssays on Convertibles and Stock Markets
Abed Masror Khah, Sara UL

Doctoral thesis (2019)

Detailed reference viewed: 87 (21 UL)
See detailEntrepreneurial Teams, New Venture Direction and Growth: Evidence from Luxembourg
Tryba, Anne UL

Doctoral thesis (2018)

New ventures can be an important driver of economic growth and technological progress. Yet, many new ventures fail and do not overcome the challenges of the early entrepreneurial phase. Extant research ... [more ▼]

New ventures can be an important driver of economic growth and technological progress. Yet, many new ventures fail and do not overcome the challenges of the early entrepreneurial phase. Extant research has acknowledged that the people who jointly start and manage a new venture have a key impact on its subsequent success and development. However, a discrepancy exists in how the interplay of their characteristics, cognition, and actions ultimately shape the way a new venture evolves. Therefore the primary purpose of this thesis is to contribute to this research stream by exploring the multifaceted role of entrepreneurial teams for new venture direction and growth. This is done with the aid of three research papers relying on a multiple case study and a specifically designed dataset from Luxembourg. The first paper illuminates how the shared pre-start-up transition moments of entrepreneurial team members influence the joint decision logic in the initial venture phase. Focusing on the composition of entrepreneurial teams, the second paper illustrates early activities that allow new ventures to leverage the diverse educational backgrounds of their team members to achieve financial growth. Lastly, the third paper explores aspects of leadership in new ventures and uncovers how agreement on an early shared vision affects subsequent changes in the entrepreneurial team, taking into account members’ relational ties. This thesis makes important contributions to research in entrepreneurship and strategic management, adding to a more fine-grained view on the micro-foundations and outcomes of entrepreneurial action. Also, it has practical implications for entrepreneurs, their mentors and investors, entrepreneurship education and policymakers. [less ▲]

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See detailWine as an Investment
Sun, Huizhu UL

Doctoral thesis (2018)

During the last two decades, the wine auction market experienced non-monotonic dynamics and provided abnormal returns. When fine wine prices started to rise in the mid-1980s, wine investing transcended ... [more ▼]

During the last two decades, the wine auction market experienced non-monotonic dynamics and provided abnormal returns. When fine wine prices started to rise in the mid-1980s, wine investing transcended from a pastime into a serious investment transforming wine into a widespread investment activity. As an alternative asset, fine wine attracts increased attention among individual and institutional investors in recent years, particularly during the financial crisis due to its diversification potential. Economists also began evaluating wine as a new alternative asset class. In this thesis, we review the wine auction markets, study the price dynamics, and answer some fundamental questions. To build solid conclusions, we developed the largest French wine auction database encompassing the last 20 years. We summary our main contributions as follows. First, we review and explain the growth in recent global wine auction markets. Second, we construct price indices with hedonic regression models to observe market movements. Third, we investigate wine investment’s diversification potential. Wine in an optimal portfolio can improve the risk-return characteristics; however, the augmentation depends significantly on the market segmentation to which the investor applies it. Fourth, we analyze the wine price bubbles and collapses detection using a newly developed econometric approach. We elucidate strong evidence of two bubbles in the Bordeaux and Burgundy wine auction markets, whereas Rhône wine price behaved in a similar, but less significant, trend as Bordeaux and Burgundy wine markets. Finally, we examine the price determinants with a particular focus on the expert effect on this experienced good. We illuminate expert influence remains economically and statistically significant throughout the sample period. Using event study methodology, we disentangle the expert effect from other price variations and assert the market significantly reflects expert’s big re-ratings in the short term, yet the effect diminishes over time. However, this re-rating effect holds insignificant for modest changes. [less ▲]

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See detailDisambiguation of Researcher Careers: Shifting the Perspective from Documents to Authors
Doherr, Thorsten UL

Doctoral thesis (2018)

The thesis describes an algorithm that disambiguates the namespaces of inventors and researchers, spawned by their patents and publications, into career paths. A probabilistic theory to assess the risk of ... [more ▼]

The thesis describes an algorithm that disambiguates the namespaces of inventors and researchers, spawned by their patents and publications, into career paths. A probabilistic theory to assess the risk of erroneously linking documents of namesakes, different individuals with a mutual name, into one career bypasses the need for training datasets, thereby avoiding a namesake bias caused by the inherent underestimation of namesakes in training/benchmark data. The economic relevance of identified careers is illustrated by two applications. The first one outlines the impact of inter-regional inventor mobility in Italy on the total factor productivity of the sending and receiving regions. We show that an inflow of high skilled labor has a significant positive effect on TFP, while outflow decreases it. We further separate mobility in firm-internal relocation and job switches to find a more pronounced effect for the latter mobility. The second application observes the reaction of German university researchers to an exogenous change in federal law pertaining the property rights of their inventions equivalent to the Bayh Dole Act. Being able to trace their careers along with the careers of an unaffected control group allows us to evaluate the efficacy of technology transfer offices replacing the former informal activities of the university professors in regard of academic entrepreneurship. We find that an overall decrease of university patenting neutralizes any institutionalized efforts of spurring entrepreneurship at the expense of informal faculty-firm networks as channels for knowledge transfer. [less ▲]

Detailed reference viewed: 147 (16 UL)
See detailEssays on M&As and Innovation
Fernandez de Arroyabe Arranz, Marta UL

Doctoral thesis (2018)

Detailed reference viewed: 139 (22 UL)
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See detailTraditions in Tension: An Ethnographic Inquiry of Luxembourg’s Family-Run Hotels
Adiguna, Rocky UL

Doctoral thesis (2018)

The suggestion that tradition plays a role in family business is a long-acknowledged but often presumed notion in family business research. As a result, studies that attempt to conceptualise tradition as ... [more ▼]

The suggestion that tradition plays a role in family business is a long-acknowledged but often presumed notion in family business research. As a result, studies that attempt to conceptualise tradition as a focal point remain scarce. This dissertation addresses this vacuum by examining the properties and processes that are involved in the tradition-making and tradition-maintaining of hospitality-based family businesses. Based on an ethnographic inquiry of five hotel-running families in Luxembourg, this dissertation inquires into the meanings and tensions of tradition. Drawing from a process perspective, it explores how family owner-managers receive, enact, and perpetuate the continuity of the family businesses as traditions. Theoretically, this study contributes to two streams of literature: to the family business literature by providing a conceptual foundation for understanding tradition as process, and to the process organisation studies literature by proposing family business as an exemplar of tradition where the past is immanent in the present. Methodologically, this study attends to discourses and narratives at the national level, the industry level, and the organisational level to contextualise the family-run hotels in a wider discursive space. These multi-level analyses constitute the basis for the application of a field ethnography which attempts to explore the relationality between different modes of discourse in a chosen field: texts, talks, actions, and images. As a result, the lived narratives of five hotel-running families are produced. This dissertation advances tradition as a root metaphor for family business and proposes three different angles of seeing the family business as tradition: family business as received tradition, family business as enacted tradition, and family business as tradition to be transmitted. In alignment with the process perspective, four dualities in the enactment of the family businesses as traditions are discussed: repetition and novelty, preservation and abandonment, being and appearing, and certainty and possibility. Ultimately, this dissertation puts into question the predominant understanding of tradition as a fixed construct argues instead that tradition's apparent unity, fixity, and stability is a result of a reflexive process which is enacted by owner-managers on a daily basis. [less ▲]

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See detailEmployment Dynamics, Firm Performance and Innovation Persistence in the Context of Differentiated Innovation Types: Evidence from Luxembourg
Zhen, Ni UL

Doctoral thesis (2018)

This doctoral dissertation examines the essential topics of employment dynamics, firm performance and innovation persistence comprehensively. In particular, this doctoral dissertation provides an ... [more ▼]

This doctoral dissertation examines the essential topics of employment dynamics, firm performance and innovation persistence comprehensively. In particular, this doctoral dissertation provides an assessment of the differentiated role of innovation strategies in employment, firm performance and innovation persistence. Chapter 2 studies the dynamic relationship between technological innovation and employment using Luxembourgish firm level data pertaining to the non-financial corporate sector during the period 2003-2012. A simple theoretical model that distinguishes the employment effect of product innovation from that of process innovation is developed. The model is then estimated by two-step generalised method of moments using an unbalanced panel data stemming from the annual structural business survey merged with the biennial innovation survey. The results show that the semi-elasticity of employment with respect to product innovation lies between 0.2% and 0.5%. The differential in the employment effects between radical and incremental innovation is estimated to be 50%. Similarly, the employment level differential between product innovators and firms with unchanged products lies between 4% and 11%. Unlike product innovation, however, process innovation does not have any significant effect on the firm level of employment. Chapter 3 investigates the two-way relationship between technological innovation and firm performance at the firm level. In the framework of evolutionary economics, innovation is regarded as a highly cumulative process which exhibits positive feedback. This chapter aims at capturing the interdependent relationship and possible bidirectional causality between innovation and firm performance. Superior firm performance facilitates the emergence of innovations, innovation contributes to firm performance by gaining successful and sustainable competitive advantage, which forms a virtuous circle. A fully recursive simultaneous model is established where product and process innovation are explicitly distinguished. The system of simultaneous equations with mixed structure is estimated by full information maximum likelihood methods. The longitudinal firm-level data is applied over the 2003-2012 period by merging five waves of the Luxembourgish innovation survey with structural business surveys. This chapter discovers that enhanced firm performance facilitates process innovation and process innovation improves firm performance, which forms a self-reinforcing virtuous circle. An opposite pattern is identified for the product innovation on the ground of cannibalization effect and inherent market risks associated with new products. Chapter 4 explores innovation persistence at the firm level by means of dynamic nonlinear random effects models based on the estimator proposed by Albarrán et al. [2015]. It aims at capturing the true state dependence which indicates the causal relationship between innovation in one period and decision to innovate in the subsequent period. The Albarrán et al. [2015] method accounts for unobserved individual effects that are correlated with the initial conditions as well as the unbalanced structure of panel. Using five questionnaire waves of Luxembourgish Community Innovation Surveys (CIS) for the years 2002-2012, this study provides new insights on the differentiated patterns of persistence among product and process innovation. Results highlight the relevance of innovation persistence for all types of innovation, particularly the highest level of persistence is found for product innovation. In addition, the state dependence of product innovation is mainly associated with sunk costs relevant to R&D expenditures, whereas the state dependence of process innovation can be attributed to other factors such as dynamic increasing returns and learning effect. The further differentiation of product innovator category reveals that the state dependence of incremental product innovation can be mainly attributed to sunk costs relevant to R&D expenditures. In contrast, the joint significance of average R&D intensity, intramural R&D share as well as the past realization of radical product innovation suggests the role of other factors such as dynamic increasing returns and learning effect in fostering state dependence for radical innovations. [less ▲]

Detailed reference viewed: 244 (35 UL)
See detailArt as an Investment
Nasser Eddine, Ali UL

Doctoral thesis (2017)

During the 1970s and 1980s, the art markets gave abnormal returns. Individuals started speculating on art prices, and institutional investors soon entered the scene. Economists then began evaluating this ... [more ▼]

During the 1970s and 1980s, the art markets gave abnormal returns. Individuals started speculating on art prices, and institutional investors soon entered the scene. Economists then began evaluating this new alternative asset class. In this thesis, we review global art markets, analyze the methodologies employed for studying art as an investment, and seek answers to some fundamental questions. To build solid conclusions, we developed the largest up-to-date dataset of repeat sales of art objects. Our main additional contributions to the literature can be summarized as follows. First, we review and explain the growth in international art markets. Second, we show that it is unreasonable to make a comparison between the two main methodologies used for studying the investment perspective of art: the repeat-sales and hedonic regression frameworks. The returns estimated using the hedonic approach depend greatly on the specifications of the model. Thus, we find that of the two, the repeat-sales models are the most robust. Third, we study the returns on art after accounting for transaction costs. Importantly, we show that taking this fair view renders impractical the widely used art-investment measurement methodologies. Fourth, we revisit the “masterpiece effect”, and find strong evidence supporting its existence. Fifth, we investigate the potential of art investment. We find that the inclusion of art in an optimal portfolio depends significantly on the abnormal returns seen in the 1980s. Omitting these years leads to its exclusion. However, art may add a diversification benefit to an investment portfolio due to its low-to-negative correlation with other asset classes. Sixth, we analyze the optimal holding period of art and find that, in general, the returns increase with the length of the holding period. Nevertheless, we observe significant returns, accompanied with high levels of volatility, for trades made over very short time horizons. We notice that this “flipping” practice has been increasing in recent decades. Finally, we consider the effect some special cases have on art investment returns. We find that artworks that trade frequently tend not to outperform the market. Moreover, the nature of an artwork’s ownership history doesn’t alter returns. We also examine the returns on artworks selected by experts, and find that, surprisingly, they underperform. [less ▲]

Detailed reference viewed: 335 (19 UL)
See detailEssays on Asset Pricing Models with Jump Processes
Cui, Xuecan UL

Doctoral thesis (2017)

This dissertation contains four autonomous academic papers on asset pricing models with jump processes, including the studies of equilibrium asset pricing model, option pricing model, and empirical test ... [more ▼]

This dissertation contains four autonomous academic papers on asset pricing models with jump processes, including the studies of equilibrium asset pricing model, option pricing model, and empirical test. The common thread between them is the application of jump processes that links them in asset price modeling. The first three papers study Lévy process and its inhomogeneous extensions, while the last one studies contagious Hawkes processes. The first essay proposes a novel equilibrium asset pricing model under the semiparametric jump diffusion framework, including drift, volatility and jump intensity in a general time-varying form. The corresponding pricing kernel provides insights on option pricing, and equity premium puzzle [Mehra & Prescott (1985)]. The analytical solutions of equity premium and European call option are given as well. The second essay introduces a new econometric method/procedure to disentangle the three time-varying components of drift, volatility and jump in asset prices. By combining Hodrick-Prescott filter and particle filters, I decomposed the three timevarying components in the S&P500 index, and observed the clustering of volatility and jumps, though the clustering effects are more pronounced when the time-varying drift is negative. Empirical results support the proposed time-varying jump diffusion asset pricing model in Chapter 2. The third essay studies the (un)importance of small jumps in option pricing models. The option pricing literature argues that the behavior of small jumps in a Geometric Lévy model is of paramount importance [Carr et al. (2002)]. This is evidently true for very short time horizons and very deep in- and out-of-the-money options. In this paper, we took the complementary view and asked what values of time to maturity and option moneyness in a Geometric Lévy model lead to option prices, which are practically indistinguishable from the price of plain vanilla options in the BlackScholes model. In other words, in what situation that the Lévy model in question can be replaced with a Brownian motion with minimal pricing error. We produced explicit tight bounds in the case of a Poisson jump process, and related heuristic bounds for arbitrary Lévy process with exponentially decaying jump intensity. The fourth essay models and tests contagious jumps in bull/bear market regimes, in which I developed the regime switching Hawkes processes to model the contagious asset jumps in the international stock market. This new model allows serial and regional contagion in international asset prices, in which contagious impact can be flexible to accommodate different market conditions. [less ▲]

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See detailESSAYS IN PRICE DISCOVERY
Wells, René Joseph Guy UL

Doctoral thesis (2017)

I claim that uninformed traders prefer ending the size of their orders with a zero (e.g. 110 shares) but it is not the case for informed traders, creating an information channel and providing a signal. I ... [more ▼]

I claim that uninformed traders prefer ending the size of their orders with a zero (e.g. 110 shares) but it is not the case for informed traders, creating an information channel and providing a signal. I propose the Last Digit Hypothesis (LDH): i) some traders exhibit a last digit preference for the digit 0 and other traders do not while ii) the latter are better able to trade on information than the former. The LDH predicts that a trade arising from a marketable order with a size ending with a 0 on average contributes less to price discovery than other trades. My empirical findings support the LDH. However, the LDH is not an equilibrium since informed traders have an incentive to mimic the preferences of uninformed traders to avoid detection and face little constraints or costs to do so. It is puzzling that I find no evidence of such mimicking. I offer plausible explanations for this finding. I carefully test the Stealth Trading Hypothesis (STH) using comprehensive datasets for the three largest European equity markets over 2002 to 2015, a period that saw trading moved into a new era. I find little support for the STH and, in fact, the commonality between these three distinct markets is the convergence over time of price discovery by trade size. It could be explained by informed traders once facing less frictions are better able to mimic the trade size choice of uninformed traders and/or more price discovery now going through resting limit orders. [less ▲]

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See detailFinancial Intermediation and Macroeconomic Fluctuations
Chevallier, Claire Océane UL

Doctoral thesis (2017)

Detailed reference viewed: 129 (26 UL)
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See detailTax havens under international pressure: a game theoretical approach
Pulina, Giuseppe UL

Doctoral thesis (2017)

Detailed reference viewed: 88 (24 UL)
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See detailEssays on Inequality, Public Policy, and Banking
Mavridis, Dimitrios UL

Doctoral thesis (2016)

Detailed reference viewed: 75 (14 UL)