Finance

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    Why are fewer German companies choosing to join the stock market?

Why are fewer German companies choosing to join the stock market?

An article by Kathleen Kahle and René M. Stulz on LSE Business Review analyses the shrinking number of public corporations in the US. We  find this phenomenon also in Germany. In our study, we find a decline in the number of listed companies in Germany driven by a decline in initial public offerings (IPOs) and an increase in delistings:

While […]

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    A minor change in market trading rules could save taxpayers billions of dollars

A minor change in market trading rules could save taxpayers billions of dollars

Society could save billions of dollars every day if trading in commodities, energy and securities was made more competitive and efficient through a minor rule change. That is the topic of my new research paper.

Every day, auctions and exchanges around the world trade bonds, stocks, currencies, electricity, metals, commodities, securities and financial instruments worth trillions of dollars. Thus even […]

November 29th, 2017|Finance, Pär Holmberg|0 Comments|
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    Dark markets: does private information make price formation less efficient?

Dark markets: does private information make price formation less efficient?

Speaking in January 2014, Michel Barnier (then the European Commissioner for Internal Market and Services and now the Commission’s chief negotiator with the UK over Brexit) justified new rules on securities exchange, which will come into full force in January 2018, in the following way:

‘The MiFID II reform means that organised trading of financial instruments must shift to multilateral […]

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    Bubbles and crashes: A vicious cycle of self-fulfilling investor sentiment

Bubbles and crashes: A vicious cycle of self-fulfilling investor sentiment

What causes financial bubbles? Before the 2008 crisis, this question was often neglected, but after the recent meltdown of the global financial market, it has attracted renewed attention among academics and policy-makers.

Before the crisis, the majority of economists assumed that investors trade financial assets at the so-called fundamental price, which reflects the “real” economic value of companies. In fact […]

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    Tech start-ups need a different approach to financial management

Tech start-ups need a different approach to financial management

We find ourselves today at the start of an industrial revolution. There have been others of course. The first revolution happened 250 years ago. Its engine was mechanisation. Another, about a hundred years ago, was all about electrification and mass production. Then 50 years ago, electronics and automation started a third revolution.

Right now, our physical and virtual worlds are […]

Success attracts new players to private equity

Private Equity is a fringe asset class no more; it has evolved, matured and refined its way into the mainstream. Yet, I foresee major changes for the industry and, fully aware that forward-looking statements have a tendency to dramatically stray from future reality, wish to dare a glimpse of what may come.

Success spawns imitators, and businesses have started to […]

The shrinking number of public corporations in the US

In his famous Harvard Business Review article titled “Eclipse of the public corporation,” Jensen (1989) argues that public corporations are inefficient organizational forms because private firms can resolve agency conflicts between investors and managers better than public firms. His prediction initially appeared invalid. As shown in Figure 1, the number of public firms increased sharply in the first half […]

Can Twitter sentiment predict stock market behaviour?

The stock markets are an incredibly competitive environment and nowadays hedge funds and investment managers are rushing to find innovative ways to produce profits for their investors and their institutions. In addition to therefore understanding the impact of macroeconomic events or regulatory constraints on specific investments, they are looking at new datasets as main sources of competitive advantage.

Someone is […]

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    UK finance needs radical reform to upgrade the post-Brexit economy

UK finance needs radical reform to upgrade the post-Brexit economy

At a recent event marking the 10-year anniversary of the financial crisis, the Governor of the Bank of England Mark Carney said the UK’s banking sector could be “15 to 20 times GDP” in just a “quarter of a century”. But such proclamations beg a big question: what is the value of all this activity and wealth to the rest of […]

The US should not roll back financial regulation

In the United States, the House of Representatives has passed the Financial CHOICE Act (Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs Act). This bill is intended to replace the financial market regulation of the Obama era, the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was a response to the global financial market crisis of 2008.

One […]

September 6th, 2017|Finance, Markus Demary|0 Comments|
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    Investors’ striking migration from growth to value investing over their life cycle

Investors’ striking migration from growth to value investing over their life cycle

The value premium

When a firm is listed on the stock market, the value of shareholders’ equity can be measured using both accounting and market-based methods. Accountants compute the book value of equity from the firm’s balance sheet. Since the stock is also continuously traded on the exchange, the market value of equity can be obtained by multiplying the stock […]

The exploding popularity of RegTech

Following on from our piece on WealthTech – we look at the rise and rise of RegTech (previously known as regulatory technology.) RegTech is a subclass of FinTech, and concerns the use of technology to create efficiencies in financial services for issues regarding regulatory reporting and compliance.

The graph below shows that, if nothing else, the term has exploded in […]

Seven signs of over-hyped Fintech

In 2015 Dan Davies wrote an excellent guide to Fintech business models (the “Fin”) that provided a very effective tool for looking beyond the hype. The other side of Fintech that the non-technologist (and even many experienced IT professionals) have trouble with is the actual “Tech”.  A great many people in finance have now reached the point where they […]

Why do bankers earn so much more than other professionals?

Are bankers overpaid? Do they have special qualities that make them deserve to earn more than other professionals? In this video interview, LSE professor Ulf Axelson explores why pay is so high on Wall Street relative to normal jobs.

Here is part of his answer: “(It’s) due to a combination of two characteristics of many of the types of jobs you have […]

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    ‘Flash Crash’: The first market crash in the era of algorithms and automated trading

‘Flash Crash’: The first market crash in the era of algorithms and automated trading

On 6 May 2010, US financial markets experienced a systemic intraday event that has come to be known as the “Flash Crash.”[i] The large and temporary decline in prices and the corresponding increase in trading volume in the S&P 500 E-mini Futures on 6 May is depicted in the figure below. During this extreme volatility event, which took about […]

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    ‘WealthTech’: The challenges facing the wealth management industry

‘WealthTech’: The challenges facing the wealth management industry

Technology is changing society more than ever before. The way we shop, socialise and communicate have all changed radically over our lifetimes. The financial services industry is in many ways behind the curve, with many product lines unchanged in decades. We are likely to enter an online and digital age and many firms are yet to adapt to the […]

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    Investment banks are already leaving London. Other jobs will follow

Investment banks are already leaving London. Other jobs will follow

In May 2017, new available jobs in London’s financial sector fell by 16% relative to the same period the previous year. And while Frankfurt and Dublin are emerging as the favourite destinations after Brexit in terms of attracting investment banking jobs, Warsaw is also becoming a destination. The announcements of actual or planned reassignments add up to a potential 17,000 jobs leaving London, out […]

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    Brexit will probably cause disruption in markets, but systemic risk is unlikely

Brexit will probably cause disruption in markets, but systemic risk is unlikely

With less than two years until Britain leaves the EU, the implications of Brexit for financial stability are of some concern. Two key central bankers have reached opposites conclusions, with Mark Carney worried and Mario Draghi more sanguine. Broadly in line with Draghi, we think Brexit should mostly decrease systemic risk, albeit with a potential for an increase.

Brexit will […]

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    How the Bank of France increased liquidity at no fiscal risk in the 1800’s

How the Bank of France increased liquidity at no fiscal risk in the 1800’s

The last financial crises highlight the importance of operational procedures used by central banks to cool down financial distress. To fulfill their mandate of financial stability, central banks have always featured temporary extraordinary loans to previously ineligible financial intermediaries or to the purchases of new types of assets.

Critics of those policies insist central banks lack knowledge on their counterparties […]

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    ‘Ledger Nirvana’ in trade processing either doesn’t exist or is aeons away

‘Ledger Nirvana’ in trade processing either doesn’t exist or is aeons away

One of the areas frequently mentioned as ripe for improvement by applications of the broad group of technologies known as blockchain, or distributed ledger technology (DLT), is capital markets. In the “ledger nirvana” of many blockchain proponents, market counterparties use consistent sets of trade data. They also use smart contracts, computer protocols that facilitate, verify, or enforce the negotiation […]