Finance @ Utrecht University School of Economics’ Post

Yet another update from the PhD camp. I'm pleased to announce that my first scientific paper, where I am the lead author, was published yesterday by Emerald Publishing. You can find the full paper here: https://lnkd.in/dpihzjN6 I am grateful to my co-authors for their valuable input, feedback, and suggestions: David Liney, my boss at Danske Bank's Model Risk Management, and head of the Investment Models Validation team. Dr. Jelena Stankevičienė, my scientific supervisor and PhD thesis advisor, and professor of Finance at Vilnius University Faculty of Economics and Business Administration. In this paper, we explore the trade-offs between risk, return, and sustainability of investments using two asset classes: US government bonds and European equities. We introduce a coupled Modern Portfolio Theory-Responsible Investment model that captures corporate and governmental externalities. The model also employs the Hamilton coefficient, developed by the famous British geneticist W. D. Hamilton in the 1960s, which acts as a measure of altruism and encapsulates investors' sustainability preferences. One of the key findings of this paper is that with higher values of the Hamilton coefficient (i.e., increasing altruism levels of the investors), portfolio allocation increasingly shifts towards bonds, which are the more sustainable and greener asset class of the two. Allocating more bonds in the portfolio also decreases volatility and lowers expected financial returns. The difference in expected financial returns between the most risk-seeking and most risk-averse investors can be as much as 4.32%, which is quite significant considering that the most risk-seeking investors can achieve up to 8.9% expected financial returns. The results also show that having a greener, US government bond-based portfolio results in lower financial returns. This difference in financial returns can be up to 2.7%. However, with increasing values of the Hamilton coefficient and rising levels of investors’ altruism, the difference between the utility derived from having sustainable assets in the portfolio and conventional financial expected utility also increases. This aligns with findings from other studies that suggest socially responsible investors are willing to sacrifice some financial returns for a more sustainable portfolio, which could accelerate the transition to a more sustainable economy.

Welcome to Professor Thorsten Hens, who is visiting our department as an Erskine visitor for Term 3, 2024. Professor Hens is the SFI Swiss Finance Institute Professor of Financial Economics at University of Zurich and Adjunct Professor of Finance at University of Lucerne and at Norwegian School of Economics (NHH). His main research areas are behavioural finance with applications to wealth management and evolutionary finance with applications to asset management. Professor Hens will give a talk this Wednesday 21 August, at 3-4:30 pm in Meremere 409. The title of his talk is "Sustainable Finance and the Cost of Capital". Here is the abstract: "With an increase in environmental, social and governance [ESG] concerns, many investors have started to invest sustainably. The seminar investigates the effects of sustainable investing on the financial returns to the investors and on the decisions of the firms. The link between the two is the cost of capital. If the cost of capital increases, firms change towards more ESG-friendly production but the ESG-concerned investors have to sacrifice financial returns. Finally, we ask whether engagement is a better channel to reform firms than sustainable investing." Everyone is welcome to attend the talk and no prior registration is required. We look forward to seeing at the seminar on Wednesday! UC Business School

Unveiling the Mysteries: Decay of Systematic Investment Strategies In the dynamic world of finance, a perplexing question lingers: why do published #investmentstrategies often lose their edge? A compelling study by Antoine Falck, Adam Rej, and David Thesmar investigates this decline, seeking to uncover the reasons why well-known strategies fade once they become public knowledge. This study's primary objective is to dissect the factors contributing to the diminished performance of investment strategies after their details are unveiled in academic journals. As #investors increasingly leverage published strategies, this understanding is vital. The authors embark on this quest by examining a dataset of 60 #published investment strategies, rigorously analyzing their performance before and after publication. The study employs a comprehensive approach, considering factors like arbitrage opportunities, overfitting indicators, and the influence of the publication date itself. The authors analyze a dataset of 60 published strategies, tracking their performance before and after publication. They consider #arbitrage (where profitability is eroded by new capital), #overfitting (where strategies excel in-sample due to excessive testing), and the influence of the publication date itself. A striking revelation is the #correlation between publication date and performance decay, accounting for 30% of the variance. This suggests finding lasting strategies becomes harder over time, with a 5 percentage point increase in Sharpe ratio decay per year for newly published strategies. Furthermore, overfitting stands out as a major issue. Strategies with complex calculations and sensitivity to data outliers exhibit sharper post-publication declines. Regression analysis reinforces this, with overfitting variables adding a significant 15% explanatory power to the model. The study concludes that the pursuit of novel strategies in #academia could be inadvertently leading to overfitted models that don't hold up in real #financialmarkets. Rigorous out-of-sample testing and skepticism toward in-sample success are essential. Falck, Rej, and Thesmar's work provides crucial guidance for academics and investors alike. It highlights the need to prioritize sustainable strategies that endure beyond initial publication. Link to the paper: https://lnkd.in/dbmmJVYp

I am happy to share something “different” today: the most recent academic output of my postdoctoral studies at FGV EAESP - Escola de Administração de Empresas de São Paulo da Fundação Getulio Vargas in collaboration with Professor Luiz Carlos Di Serio is finally available. Our paper on Financialization and Innovation Management has been published by the Journal of Innovation Economics and Management (2024/3, issue 45). It took us a while but it is finally out! The full paper can be found here: https://lnkd.in/eCEPAsmd PS: The full results of the postdoc can be found in one of my books (in Portuguese), which includes the theoretical background, survey with companies and case studies: https://lnkd.in/eFCm_wYK #finance #innovation #financialization #management #value #cfo

Graduating from the Institute for Industrial Economics at Norges teknisk-naturvitenskapelige universitet (NTNU) the third time might not be the flashiest achievement, but someone had to be the first completing an MSc, PhD, and Executive Master from "indøk"😊 This semester, I wrapped up my master's thesis on staging venture capital investments. While there’s plenty of research on managing risk in individual VC investments, there’s far less at the portfolio level. Here are my key takeaways based on power-function simulations: 1. For a portfolio of investments, staging has a considerable positive effect on returns if there is a correlation between past and future performance of the investments. 2. The positive impact is much less significant if there is no correlation between past and future performance. 3. The diversification effect for portfolios with correlated past and future performance is considerable, even for small portfolios (10 investments). What does this mean for VC Investors? 1. We should prioritize portfolio risk management over isolated investments. 2. For investments with less predictable valuation steps (e.g., biotech, deeptech), staging should be minimized. 3. For investments in companies with more predictable valuations (e.g., SaaS B2B), staging is effective and may be an important strategy to create a diversified portfolio with less investments. These insights, while not groundbreaking, may be crucial for setting strategies regarding fund size and portfolio composition. Many thanks to my esteemed supervisor Maria Lavrutich and the Master of Technology Management program at Norwegian University of Science and Technology (NTNU) #ventureinvestments

It’s exciting that LSE’s Henry Overman has been appointed to the UK Government’s hugely important Industrial Strategy Advisory Council. Prof Overman’s work at the What Works Centre for Local Growth has been instrumental in developing our understanding of how localised strategies, levers and funding can fast-track local - and therefore national - growth. Inclusively and sustainably. His experience and expertise will be crucial in guiding and advising the Government on… well… what works as they finalise their Industrial Strategy, expected towards the middle of next year. Tech and innovation will - rightly - be at the heart of the Strategy. They will keep us competitive, and help create new jobs. But the Strategy will only succeed with the support of the social sciences. 💸 The economists who understand how government interventions can work best to fasttrack growth and innovation in sectors such as green technology, and where they’ve failed in the past. 🤖 The behavioural scientists who can predict the take-up of new technologies, & advise on how mitigate concerns about flashpoint issues such as the use of AI. 📈 The political scientists who analyse government systems to understand how beneficial reforms can be achieved: in devolution, in investment, in quality of life. The London School of Economics and Political Science (LSE) has huge, world-leading expertise in all these issues and more, and we’re keen to talk to anyone grappling with the policy realities of a new Industrial Strategy in a fast-changing world… #industrialstrategy #growth #whatworks #socialsciences

It's hard for me to believe, but I can now look back on 20 years as a professor. (I recently posted here https://lnkd.in/eNJWTNgS how it all began in Vienna).   A lot has happened during this time: Dozens of publications have been added to my list, including some highly cited ones and also three books. I was involved in dozens of doctorates and was also able to habilitate five people. I have also received honorary second appointments at the Centre of European Research in Microfinance, the Centre for Accounting, Finance and Governance at the Hanken School of Economics, Helsinki and most recently at the Zentrum für Klimaresilienz // Centre for Climate Resilience (University of Augsburg). In addition to the many achievements, I have also suffered numerous failures, which are not usually talked about. (I'll write a separate post about this).      I have developed enormously in my research areas: from general finance questions, I have now ended up focusing on digital and sustainable finance.    Overall, I can be really grateful for this time, especially to the two universities that hired me as a professor: Universität Regensburg and WU (Wirtschaftsuniversität Wien). And, of course, I am also a little proud. For me, the profession of professor is still very close to the ideal, clouded only by (sometimes) an excessive amount of administrative work.   Now it's time to look ahead: I still have a lot to do. Watch out for what's to come.

Students, companies, governments, and societal organisations join forces to make a positive impact together for a better world. The UvA EB Challenge - an initiative from UvA Economics and Business - is a competition in which students are challenged to develop their own innovative ideas to provide solutions for social and sustainability issues. Under the guidance of experienced coaches from the business world they develop their creative ideas into a concrete and feasible business plan. Read more about the UvA EB Challenge via the link in the comments below. #challenge #innovation #impact

🎓 How are scale-ups preparing for the future? 🚀 My Master's student, Caio Arruda, from ISEG - Lisbon School of Economics & Management, is conducting a groundbreaking study on how scale-ups in Brazil and Portugal apply Strategic Foresight. He is exploring how these practices impact their ability to navigate future uncertainties. 🔍 If you work in a scale-up or know someone who does, your participation is essential for the success of this research! The survey is: Quick: takes only 10 minutes Anonymous Available in Portuguese and English 💡 Let’s help Caio complete this innovative project and finish his Master's degree on time! The link to participate is in the comments. 📩 Feel free to share with your network to broaden the reach of this research. Thank you so much for your support! 🙌 Manuel Mira Godinho Ana Casaca Amílcar Moreira Manuel Laranja Joana Santos Silva Filipa Cristovão

Read Florencia Roca’s last paper in our Journal of New Finance “What is New in Value Investing? A Systematic Literature Review” which retrieves a database of 400 academic works published between 1975 and 2020, and identifies competing explanations of the value premium and wrong beliefs on investing. Read the full article here https://lnkd.in/dNbresF5. #SoyUFM #UFMadrid