Zero Magic is a trick for the financial markets, which has the capacity to undermine the perceived value of a publicly traded company and profit from this. Short selling is a way of profiting from loss: Making money if and when a target company loses in value. It is a fundamental market activity that goes as far back as the first stock, yet to this day little is publicly known about the strategies employed by short sellers. On the US exchanges there is no requirement for hedge funds to disclose short positions, and in other jurisdictions such requirements are very limited. Zero Magic was developed by covertly infiltrating a secretive hedge fund specializing in short selling, and reverse engineering its methods. In brief, the hedge fund’s trading strategy is based on identifying suitable short selling targets through analyzing networks of corruption, and then framing critical newsworthy stories about these target companies that can be anonymously distributed among journalists. Profit is gained when a target company loses in value. Rigorous measures are taken by the fund never to be identified as the source of a negative campaign.Access to the hedge fund was gained through the art world. The founder and co-director routinely supports artists and art institutions and is said to have gotten the idea for his fund when looking at a Mark Lombardi drawing (an artist known for mapping networks of power and corruption). It is hard to tell whether the founder’s engagement with art merely entertains personal vanity, or if it functions more strategically as a means of “secret publicity” for the fund; giving access to investors, while staying under the radar of more mainstream public relations. Covert techniques such as hidden recordings and proxy researchers were used to uncover the fund’s methods. With the assistance of Théo Bourgeron, sociologist of finance, Zero Magic not only reconstructs the workings of the trading strategy, but offers a fully operational magic gimmick. The magic gimmick is a computer program providing non-expert users the means to identify relevant short selling targets (companies with weak “valuation conventions”), and a step-by-step guide to undermining their perceived value. With this gimmick one can execute a successful short sale without any previous contacts in the investor community or access to insider information. A US patent application for the trick was filed in January 2016.The artistic PhD “Zero Magic: Shifting the Valuation Convention” concludes with a stage performance and a magic box:The stage performance, “On a Long Enough Timeline the Survival Rate for Everyone Drops to Zero” with magician Malin Nilsson, performed on May 11 and 12, 2016, at Cirkus Cirkör, Stockholm. Through the ticket sales, audience members are drawn into the Zero Magic trick, buying into the predicted future loss of a target company. The magic box, prepared for public archives, contains the Zero Magic computer software, a US patent application for a “Computer Assisted Magic Trick Executed in the Financial Markets” and four historical examples of magic tricks played out beyond the stage, in the world at large.

This diploma thesis is devoted to the linkages among stock, bond and foreign exchange markets in the Czech Republic, Austria, Germany and Poland during the period from the beginning of the year 2007 to the end of the year 2014. In order to complexly describe the interconnections among the markets, we utilized two kinds of spillover indices (from the generalized and structural VAR model), dynamic correlation coefficients obtained from the multivariate GARCH model and contemporaneous coefficients from the structural VAR model that was identified through heteroskedasticity in structural shocks. These methods enabled us to describe the linkages among the markets from different angles, to capture their time evolution and to obtain a notion about the transmission mechanism among these markets in Central Europe. The results, inter alia, indicate an intensifying interconnection among the markets during crisis periods, lowering impact of stock markets, increasing influence of bonds and a dominant role of German bonds and Austrian stocks. At the same time, we were able to capture the influence of the European sovereign debt crisis on the spillovers and on the intensity of linkages among the markets. We showed that the intensity of linkages among bond markets relented, probably as a result of higher emphasis on the...

Les composants des marchés financiers peuvent être vus comme une chaîne globale de production de confiance, c’est-à-dire de crédit. Nous appelons cet ensemble de d’acteurs, de règles du jeu et d’outils le Financial Assets Production System (FAPS). Dans le cadre d’une grille de lecture institutionnaliste (Veblen, Coase, North, Williamson) nous essayons de décrire et comprendre la production concrète des actifs financiers, leur système de production et de circulation. Puis nous illustrons par quelques exemples sur les structures globales des marchés, les composants et leurs relations, l'hypothèse "nationality defines organisational rationality". Cette hypothèse est étayée par les nombreux travaux d’anthropologues (Hall, Godelier), sociologues (Banfield, d’Iribarne, Mauss), économistes (Akerlof, Breuer, Tarde, Rugman), autres spécialistes des sciences sociales (historiens, politologues) et techniciens du management interculturel (Hofstede, Trompenaars). « Institutions and culture matter ». La culture nationale, par opposition aux autres référentiels culturels, modèle en partie les composants du marché et leur fonctionnement. Dans cette perspective nous ouvrons la réflexion sur les impacts du déploiement mondial des pratiques de standardisation-certification des services, produits et processus financiers. Et donc sur une potentielle déculturation des structures de marché et leur convergence vers un éventuel modèle « pur », sans marqueurs culturels, de production d’actifs financiers. En d’autres termes, ces réducteurs d’incertitude que sont les normes et leur utilisation sont-ils des « effaceurs de culture » en produisant un isomorphisme institutionnel volontaire ? Notre idée directrice est que la culture nationale n’est pas soluble dans l’ISO, mais au contraire peut s’y révéler. Les caractéristiques nationales ou civilisationnelles des systèmes de production d’actifs financiers ne sont pas sur le point de disparaître, les développements rapides des formes prises par la finance éthique sont là pour corroborer cette hypothèse. / Financial market components can be seen as a global credit production system. We call this global intermediation chain and its different links the Financial Assets Production System (FAPS).Institutional economics (Veblen, Coase, North, Williamson) provide some guidelines and tools to understand the production and distribution processes of financial assets. The aim is to describe, using examples, the way asset production is national specific. “Nationality defines organizational rationality”. This hypothesis is supported by some findings in anthropology, sociology, political science, history and the intercultural management school. “Institution and culture matter” is the motto of institutional approach. National culture, a specific level of cultural approach, has a readable impact on some market components and related functioning.But if market organization is national specific, what could be the impact of the on-going roll-out of international technical standards on those cultural layers. If standards are national culture erasers does it mean that there is a culture-free market model? And that a universal functional isomorphism, due to standards usage, provides more rational market practices to global players? Our findings are that national cultural market practices are not disappearing with standards global roll-out. Most of the time national cultures are still embedded in universal standards used by market players. The swift development of Ethical Finance seems to support the idea that domestic cultures are still strong drivers in financial markets set up.

In this work, neural networks are used to forecast daily Realized Volatility of the EUR/USD, GBP/USD and USD/CHF currency pairs time series. Their performan-ce is benchmarked against nowadays popular Hetero-genous Autoregressive model of Realized Volatility (HAR) and traditional ARIMA models. As a by-product of our research, we introduce a simple yet effective enhancement to HAR model, naming the new model HARD extension. Forecasting performance tests of HARD model are conducted as well, promoting it to become a reference benchmark for neural networks and ARIMA.

Les systèmes juridiques d’aujourd’hui diffèrent passablement de ceux en vigueur il y a quarante ans. L’affirmation est applicable notamment aux domaines économiques qui se trouvent sous l’empire de ce qu’on connaît comme régulation. En effet, un simple regard sur le droit contemporain montre, d’une partie, un éclatement d’entités nouvelles qui ont pour mission la création, la surveillance, voire l’application du droit, et, d’une autre partie l’existence des aménagements dans la conception et l’application des normes qui régissent une certaine activité ; le développement de la soft law, de l’autorégulation, des normes internationales, parmi d’autres exemples, font partie desdits aménagements. Ce phénomène, nommé nouvelles formes de régulation, fortement plébiscité par une partie de la doctrine juridique il y a quelques années, est désormais remis en cause. Même si la régulation constitue un phénomène à vocation universelle, nous avons décidé de mettre les marchés financiers au centre de notre analyse. Cela parce que les secteurs régulés présentent une diversité de situations, de modalités d’action et de fondements qui empêchent une analyse d’ensemble. On a dit dans ce sens, que la légitimité de la régulation et des règles qu’elle pose ne peut pas être envisagée de manière abstraite ; elle doit être appréciée dans les rapports entre ses normes et l’objet régulé. Les marchés financiers sont, dans ce contexte, un laboratoire privilégié concernant l’expérimentation des nouvelles formes de régulation, ils se trouvent aux origines de leur usage et c’est précisément dans ces marchés que la remise en cause des nouvelles formes de régulation s’est posée. Notre étude concerne l’usage des nouvelles formes de régulation dans l’encadrement des marchés financiers dans six pays : la France, l’Angleterre, les États-Unis et trois pays latino-américains : le Mexique, la Colombie et le Chili. Les raisons de ce choix sont les suivantes. D’abord, il nous semble légitime d’aborder les législations qui se trouvent à l’origine des phénomènes ici analysés. Le modèle américain s’impose, mais aussi le modèle anglais, car il a été, pendant un moment, l’exemple le plus poussé du libéralisme économique, donc, des origines des nouvelles formes de régulation. La France était aussi une référence indispensable. En effet, comme nous voulons le montrer, la France est l’exemple le plus parfait de la quête d’un aboutissement de la logique de la régulation et de la systématisation, même si inachevée, du droit régulateur. Nous avons choisi le Mexique à cause de la taille de son marché financier, la Colombie, parce qu’elle a entrepris des réformes juridiques remarquables, et le Chili, car il est le pays le plus stable politiquement et économiquement dans le sud de l’Amérique latine. / The legal systems of today are different than those that came into force 40 years ago. The assertion is applicable particularly to the economic areas under that a kind of law, known as regulatory systems. Indeed, a simple look at the contemporary law shows first; a rise in new entities which have the power of creation, the monitoring and the application of law and second; the existence of adjustments in the design and implementation of the standards that govern an activity, the development of soft law, self-regulation and standards, among other examples. This phenomenon, named new forms of regulation, which a few years ago was strongly praised by a part of legal doctrine, is now being questioned. Even if the regulation constitutes a universal phenomenon, we decided to focus in the financial markets. This is because the economic sectors under the regulatory systems have a diverse situations in terms of action and their fundamentals that hinders a comprehensive analysis. In this sense, it has been said that the regulatory systems rules legitimacy cannot be considered abstractly. This must be assessed by the relations between its standards and regulated objects. Financial markets are, in this context, a privileged test case concerning the experimentation of new forms of regulation. In these markets we found the origins of the use of soft law, self-regulation and other new forms of regulation, and it is precisely in the financial markets where that the disputes about the efficacy and the legitimacy arise about new forms of regulation. Our study concerns the use of new forms of regulation within the framework of the financial markets in six countries: France, England, the United States and three Latin American countries: Mexico, Colombia and Chile. The reasons for this choice are as follows. Firstly, it seems valid to look at the legislation where the new forms of regulation came from. The American model is needed, but also the English model, because it was, for a while, the more thorough example of economic liberalism, therefore a source of new forms of regulation. France is also an indispensable reference. Indeed, as we want to show it, France is the most perfect example of the quest for a culmination of logical regulation and systematization of regulatory law. We have chosen Mexico because of the size of its financial market; Colombia because it has undertaken remarkable legal reforms linked with the new forms of regulation and Chile, because it is the most stable country both politically and economically in the South of Latin America.

La présente étude consiste en l’analyse comparative de l’Autorité des Marchés Financiers et du Comité d’Etat de la Bourse, les autorités de régulation actuelles des marchés de capitaux de France et du Vietnam, deux pays qui partagent un héritage historique commun et des relations particulières dans de nombreux domaines, dont celui juridique. Non seulement le CEB et l’AMF connaissent des mutations dues au contexte économique global, mais le régulateur vietnamien a vu sa charge de travail s’accroître considérablement suite à l’accession du Vietnam à l’OMC. Organes d’encadrement voulus par les pouvoirs publics de la France et du Vietnam, le Comité et l’Autorité assurent la protection de l’épargne et veille à l’équilibre des marchés, en exerçant leurs attributions en matière de contrôle et en recourant à leur pouvoir normatif et d’élaboration d’actes non-décisoires de manière constante. Si leurs relations avec les autres entités du système financier varient sensiblement pour chacun d’eux, les disparités de leurs pouvoirs répressifs respectifs s’estompent de plus en plus pour aller dans le même sens. / This study consists of the comparative analysis between the Autorité des Marchés Financiers and the State Securities Commission, the current regulatory authorities of the capital markets in France and Vietnam, two countries which have a common historical heritage and particular relations in many fields, even legal industry. Not only the SSC and the AMF know changes due to global economic context, but also the Vietnamese regulator had its workload considerably increased following accession for Vietnam. Being management bodies which creation was wanted by public authorities in France and in Vietnam, the Commission and the French authority ensure the saving protection and attend to the market equilibrium, by performing their supervisory powers and by using their normative capacities and developing non-constraining acts in a constant way. If their relations with others entities of the financial system vary appreciably for each one, the disparities of their respective repressive capacities decrease and go more and more in the same direction.

Les opérateurs de marchés sont des experts talentueux individualistes et opportunistes qui interviennent sous contrainte de temps dans un environnement centré sur la performance où l’argent et le risque constituent, outre le nerf de la guerre, une préoccupation de chaque instant. Dans ce jeu d’acteurs visant la croissance absolue mais dont les intérêts divergent parfois, quelle est la place du management ? Ce travail s’appuie sur un cadre théorique qui s’articule autour de la sociologie des professions et de la sociologie de la traduction ainsi que de la théorie des parties prenantes. Il mobilise également des théories relatives à la culture de la performance (Competing Value Framework de Quinn), au contexte de risque, d’incertitude et de crise (théorie des jeux), au management d’experts talentueux, individualistes et opportunistes (théories du management et compétition), aux relations à l’argent (théorie de l’action raisonnée et théorie de l’action située). Sur le plan théorique, nos apports sont de deux ordres : nous conjuguons sociologie de la traduction et théorie des parties prenantes ; nous abordons la compétition sous un angle non plus inter-organisationnel mais plutôt intra-organisationnel. L’enquête terrain s’articule autour d’une phase exploratoire (feedbacks de 70 managers ayant bénéficié de formations au management et 15 entretiens exploratoires) permettant la construction d’un questionnaire qui a trouvé écho auprès de 37 managers répondants. L’analyse des données obtenues prend la forme d’un codage à visée théorique réalisé avec l’aide du logiciel NVivo. Nos apports pour le terrain résident en une meilleure compréhension des règles du jeu et en la préconisation de remettre l’Humain au coeur du système, par des actions de développement des managers et de partage des bonnes pratiques ou par l’accès à l’actionnariat pour les managers (voire les collaborateurs clefs). / Market operators are individualistic and opportunistic talented experts involved under time pressure in an environment focused on performance, where money and risk are, in addition to the sinews of war, a constant concern. In this game, where all players focus on absolute growth but whose interests sometimes diverge, what is the role of management? This research study is based on a theoretical framework that focuses on the sociology of professions, the ANT (Action Network Theory) and the stakeholder theory. It also mobilizes theories related to the culture of performance (Competing Value Framework, Quinn), the context of risk, uncertainty and crisis (game theory), the management of individualistic and opportunistic talented experts, (management theories and competition), relationships to money (theory of reasoned action and theory of situated action). On the theoretical side, our contributions are twofold: we combine ANT and stakeholder theory, we address competition with an intra-organizational rather than an inter-organizational angle The field survey is based on an exploratory phase (feedback from 70 managers who received training sessions in management and 15 exploratory interviews) to build a questionnaire answered by 37 managers. Data are analyzed through a theorical coding process with the help of NVivo software Our contribution for the professionals is a better understanding of the rules and the recommendation to place People in the heart of the system, by developing management skills, sharing best practices or encouraging shareholding for managers (or key people).

The following dissertation contains two unique empirical studies that contribute to the overall literature in the field of Financial Economics in the areas of mutual fund investing and financial intermediation and regulation. The first Chapter, entitled “The Impact of Macroeconomic Stress on the U.S. Financial Sector”, examines the relative impact of macroeconomic stress on financial and non-financial U.S. firms. Empirical results show that macroeconomic shocks appear to have a larger impact on financial firms. Additionally, the sensitivity of financial firms to macroeconomic events can be traced to the influence of non-depository institutions, or “shadow banks”, like finance and investment companies, which are less regulated than depository institutions. The results coincide with several trends in the financial sector including increased competition, complexity and interconnectedness and highlight the need for governance mechanisms that account for the risks associated with these factors. The second chapter, entitled “Partial Adjustment Towards Equilibrium Mutual Fund Allocations: Evidence from U.S.-based Equity Mutual Funds”, examines the relative efficiency of equity mutual funds in terms of speed of portfolio adjustment by applying a partial adjustment model. Empirical results show that mutual fund managers are able and willing to quickly adjust their portfolios when results have been sub-optimal, implying that the cost of persistent poor performance is perceived as being high. Managers can offset about 106 percent of the deviation within one period. Additionally, results show that funds that typically engage in the costly production of specialized information, like emerging market and sector funds have more efficient speeds of portfolio adjustment than more passive funds, like market index funds. The results imply that actively managed funds may have efficiency advantages that have been previously ignored in the empirical literature.

Thesis advisor: Harold Petersen / According to the Efficient Market Hypothesis (EMH), speculative bubbles do not exist and are impossible. We disagree. If prices are the only observable component of an asset’s value, and they themselves are an aggregated consensus of perceived value, then what about the Efficient Market Hypothesis (EMH) is testable? Rather than assume that prices always reflect value (i.e. perfect market efficiency), we maintain that markets are efficient to the extent that one can be confident that tomorrow’s prices will not diverge dramatically or arbitrarily from today’s prices, absent significant new information. Speculative bubbles are not materializing every day, every month, or even every year. But they do have the potential and indeed a tendency to occur from time to time. If markets are efficient, what explains all the trading? Rather than assume rational expectations and a homogenous investor class, we assume four investor classes that diverge in their perception of value (i.e. in their expectation of future returns) and thus trade with each other. Using insights from Hyman Minsky’s Financial Instability Hypothesis (FIH), we develop a theoretical framework for how a speculative bubble might materialize within a modern capitalist economy with securities markets’ that follow a random walk. Obviously, there is no “bubble” variable. We use Tobin’s Q, the ratio of the price of an asset to its replacement cost, and Shiller’s cyclically adjusted P/E ratio as proxy variables for bubbles. We find statistically significant, negative relationships between both of these proxy variables and our dependent variable, Ten Year Cumulative Returns, thereby providing evidence against the EMH and suggesting the possibility of speculative bubbles. / Thesis (BA) — Boston College, 2014. / Submitted to: Boston College. College of Arts and Sciences. / Discipline: Economics Honors Program. / Discipline: Economics.

Der erste Teil der Arbeit beschreibt eine Methode, Auszahlungen zu bewerten, die einem auf dem Finanzmarkt nicht absicherbaren Risiken ausgesetzt sind. Im zweiten Teil berechnen wir den maximalen Nutzen und optimale Handelsstrategien auf unvollständigen Märkten mit Hilfe von stochastischen Rückwärtsgleichungen. Wir betrachten Händler, deren Einkommen einer externen Risikoquelle ausgesetzt sind. Diese vervollständigen den Markt, indem sie entweder einen Bond schaffen oder gegenseitig Verträge schliessen. Eine andere Moeglichkeit ist eine Anleihe, die von einer Versicherung herausgegeben wird. Die Risikoquellen, die wir in Betracht ziehen, können Versicherungs-, Wetter-oder Klimarisiko sein. Aktienpreise sind exogen gegeben. Wir berechnen Preise für die zusätzlichen Anlagen so dass Angebot und Nachfrage dafür gleich sind. Wir haben partielle Markträumung. Die Präferenzen der Händler sind durch erwarteten Nutzen gegeben. In Kapitel 2 bis Kapitel 4 haben die Händler exponentielle Nutzenfunktionen. Um den Gleichgewichtspreis zu finden, wenden wir stochastische Rückwärtsgleichungen an. In Kapitel 5 beschreiben wir ein Einperiodenmodell mit Nutzenfunktionen, die die Inada-Bedingungen erfüllen. Der zweite Teil dieser Arbeit beschäftigt sich mit dem robusten Nutzenmaximierungsproblem auf einem unvollständigen Finanzmarkt. Entweder das Wahrscheinlichkeitsmass oder die Koeffizienten des Aktienmarktes sind ungewiss. Die Lösung der Rückwärtsgleichung beschreibt die nutzenmaximierende Handelsstrategie und das Wahrscheinlichkeitsmass, das in der Auswertung des robusten Nutzens benutzt wird. Für die exponentielle Nutzenfunktion berechnen wir Nutzenindifferenzpreise. Ausserdem wenden wir diese Techniken auf die Maximierung des erwarteten Nutzens bezüglich eines festen Wahrscheinlichkeitsmasses an. Dafür betrachten wir abgeschlossene, im allgemeinen nicht konvexe zulässige Mengen für die Handelsstrategien. / The first part of the thesis proposes a method to find prices and hedging strategies for risky claims exposed to a risk factor that is not hedgeable on a financial market. In the second part we calculate the maximal utility and optimal trading strategies on incomplete markets using Backward Stochastic Differential Equations. We consider agents with incomes exposed to a non-hedgeable external source of risk by creating either a bond or by signing contracts. The sources of risk we think of may be insurance, weather or climate risk. Stock prices are seen as exogenuosly given. We calculate prices for the additional securities such that supply is equal to demand, the market clears partially. The preferences of the agents are described by expected utility. In Chapter 2 through Chapter 4 the agents use exponential utility functions, the model is placed in a Brownian filtration. In order to find the equilibrium price, we use Backward Stochastic Differential Equations. Chapter 5 provides a one--period model where the agents use utility functions satisfying the Inada condition. The second part of this thesis considers the robust utility maximization problem on an incomplete financial market. Either the probability measure or drift and volatility of the stock price process are uncertain. We apply a martingale argument and solve a saddle point problem. The solution of a Backward Stochastic Differential Equation describes the maximizing trading strategy as well as the probability measure that is used in the robust utility. We consider the exponential, the power and the logarithmic utility functions. For the exponential utility function we calculate utility indifference prices of not perfectly hedgeable claims. Finally, we maximize the expected utility with respect to a single probability measure. We apply a martingale argument and solve maximization problems. This allows us to consider closed, in general non--convex constraints on the values of trading strategies.