This dissertation studies topics in financial economics. In the first chapter, The Corporate Supply of (Quasi) Safe Assets, I examine whether the demand for safe assets affects nonfinancial corporations in the US. Investors value safety services in financial assets, such as the ability to serve as a store of value, to serve as collateral, or to meet mandatory capital and liquidity requirements. I present a model in which investors value safety services not only in traditional safe assets such as US Treasuries, but also in corporate debt. Shareholders thus maximize the value of the firm by complementing standard business operations with safe asset creation. Based on this theoretical framework, I use the CDS-bond basis to derive a measurement of the safety premium of corporate bonds. I document substantial cross sectional variation in the safety premium of corporate bonds, which allows me to test the model’s predictions. I show that a high safety premium leads toa marked increase in debt issuance by relatively safer firms. These debt proceeds have a small impact on real investment and are largely used instead for equity payouts. This mechanism can explain why, in the aftermath of the financial crisis, non-financial investment grade companies significantly increased their debt issuance and equity payout while investment remained weak. The second chapter, The Cross-Section of Risk and Return, focuses on a common practice in the finance literature which is to create characteristic portfolios by sorting on characteristics associated with average returns. We show that the resultant portfolios are likely to capture not only the priced risk associated with the characteristic but also unpriced risk. We develop a procedure to remove this unpriced risk using covariance information estimated from past returns. We apply our methodology to the five Fama-French characteristic portfolios. The squared Sharpe ratio of the optimal combination of the resultant characteristic efficient portfolios is 2.13, compared with 1.17 for the original characteristic portfolios. In the third chapter, Should Information be Sold Separately? Evidence from MiFID II, we examine whether selling information separately improves its production. We use a recent regulation in Europe (MiFID II) that unbundles research from transactions to investigate this question. We show that unbundling causes fewer research analysts to cover a firm. This decrease does not come from small- or mid-cap firms but is concentrated in large firms. Contrary to conventional wisdom, the reduction in the coverage quantity is accompanied by an increase in the coverage quality. Further analyses suggest that the enhancement of analyst competition could drive the results: inaccurate analysts drop out (extensive margin) and analysts who stay produce better-quality research (intensive margin). Our findings suggest that selling information separately improves information quality at the cost of reducing information quantity.

The thesis develops a series of field experiments on both the investor side and the startup side to understand both investors' investment preferences and entrepreneurs' collaboration preferences in the U.S. entrepreneurial financing system. On the investor side, Chapter 1 studies whether early stage investors are biased against female, Asian, and older startup founders using two complementary field experiments consisting of a correspondence test and an incentivized resume (IRR) rating experiment. Chapter 2 provides causal evidence of investors' general investment preferences for multiple startup characteristics, including both the human capital characteristics and the non-human capital characteristics, using the same experimental design. On the startup side, Chapter 3 studies whether startup founders are biased against female and Asian investors using a symmetric IRR experiment. Chapter 4 investigates how investor's human capital characteristics and funds' organizational capital characteristics affect founders' collaboration interest, which explains VC funds' performances through attraction of potential deal flows. These experiments constitute a field experimental system in the two-sided matching market, providing crucial causal evidence addressing several fundamental questions in the entrepreneurial finance literature.

Background: The trend in environmental reporting has been continuously increasing. However, there is a lack of accepted uniform standards for accreditation, standardization, and evaluation of green investments, which slows down the process of mobilizing capital to meet sustainability objectives. In response to this, the European Union has created, in summer 2019, a new Taxonomy Regulation in an effort to increase green investing.  Purpose: Skepticism towards green organizations is on the rise and the phenomenon, namely greenwashing, can be argued to be one of the biggest threats to sustainable development. Previous research on greenwashing has so far only looked at the effects it has on consumers. This study identifies this research gap and alternatively investigates the perspective of the investors on greenwashing. Prior to the EU Taxonomy, there were limited regulations in place to ensure a universal measurement of sustainable actions that were mandatory. This raises the question of whether the EU Taxonomy truly has the potential to reduce greenwashing or not. A descriptive investigation of the current literature on problems of greenwashing within the financial sector can seek to identify the critical themes concerning the EU Taxonomy. Construct a framework on which the EU Taxonomy may be most effective in reducing the types of greenwashing.  Research Question: What is the potential of the new EU Taxonomy to increase transparency within the sustainable financial sector that is threatened by greenwashing? Method: Qualitative study; exploratory case study approach; the paradigm of interpretivism as our research philosophy; interviews based on the inductive approach, semi-structured interviews with a mix of open- and close-ended questions; purposive sampling method; triangulation data analysis with findings visualized in a tree diagram. Conclusion: A framework is presented that identifies the high/moderate/low potentials of the EU Taxonomy decreasing greenwashing in the financial sector. Our findings conclude that the EU Taxonomy showed great potential in giving a more comprehensive understanding of the company’s sustainable actions. The development of our findings contributes to a better current understanding of the threats of greenwashing for investors and can help to increase their confidence in sustainable investing.

This dissertation studies topics in financial economics. In the first chapter, Raising Bond Capital in Segmented Markets, I study the cost of bond capital. The cost of bond capital to firms that is determined at issuance often exceeds yields trading in secondary bond markets. I find that the difference between yields at issuance and in secondary markets, the ``issuance premium'', spikes in bad times, increasing firms' costs of capital. This suggests that the economics of the relatively understudied primary bond markets -- where firms sell new bonds via underwriters to investors -- are important for understanding firms' costs of capital and access to credit over the cycle. Leveraging new data on bond issuance, I estimate a model of primary markets that explains the issuance premium and its impact on bond issuance volume. Using high-frequency variation in bond supply as an instrument, I find that investors are more sensitive to issuance premiums than the remainder of credit spreads. As issuance premiums rise in bad times, the share of more price-elastic short-term investors endogenously increases, supporting bond volumes. The preferences of primary market investors therefore directly affect the transmission of shocks to firms' costs of capital and bond issuance volume, as well as the price impacts of corporate bond purchase policies. The second chapter, Bond Market Stimulus: Firm-Level Evidence from 2020-21, is co-authored with Olivier Darmouni. We use micro-data on corporate balance sheets to study firm behavior after the unprecedented policy support to corporate bond markets in 2020. We find that as bond yields fell, firms issued bonds to accumulate large and persistent amounts of liquid assets instead of investing. Conceptually, the benefits depend on how highly bond issuers valued this liquidity at the margin. We show they generally had access to bank liquidity that they chose not to use: many issuers left their credit lines untouched, while others used bonds to repay existing loans. Moreover, equity payouts remained high: almost half of issuers still repurchased shares in Spring 2020. In the third chapter, Global Demand Spillovers: the Role of Underwriting Networks, I study the role of underwriter networks in transmitting demand shocks across global jurisdictions. Using novel data and a difference-in-differences strategy, I find that central bank corporate bond purchases spill over to foreign jurisdictions through bond underwriting networks. The diff-in-diff exploits the European Central Bank's 2016 corporate sector purchase program. I compare U.S. firms connected to underwriters with more or less Eurozone clients. Firms connected with banks with more European clients had larger orderbooks and issued more at lower costs. Treated firms do not increase real investment, but rather increase equity payouts. I identify bond underwriting networks as a novel channel through which demand shocks spread across borders. These results matter for understanding the overall impact of corporate quantitative easing programs.

El objetivo de la presente investigación es demostrar que el proyecto Short deportivo multifuncional ZOOM, es una idea innovadora para deportistas que necesitan de una prenda deportiva que satisfagan sus necesidades de llevar objetos personales y obtener resistencia física. Contamos con un equipo de cuatro accionistas que tienen experiencia en diferentes áreas de la empresa. Con este proyecto se desea ayudar a niños en contexto de vulnerabilidad, destinando el 1% de las ventas. El producto se diferencia en calidad, diseño y satisfacción del cliente. Como puntos importantes, se define los aspectos generales del negocio, el planeamiento estratégico y se demuestra la investigación o validación de mercado. Además, se desarrolla el plan de marketing, plan de operaciones, la estructura organizacional y recursos humanos. Finalmente, se explicará el plan financiero, cual el horizonte del proyecto es de cinco años, la inversión inicial será de S/ 215,920 financiados en 80% por capital de los accionistas y 20% por capital externo mediante un préstamo bancario. El precio de venta unitario de la prenda S/119.00 en los dos primeros años. El proyecto es viable desde el punto de vista económico ya que la TIR del flujo de caja de libre disponibilidad de 154.83% es mayor al COK de 10.38%. El proyecto es viable desde el punto de vista financiero ya que la TIR del flujo de caja del inversionista de 166.52% es mayor al WACC de 13.95%. / The objective of this research is to demonstrate that the ZOOM multifunctional sports shorts project is an innovative idea for athletes who need sportswear that meets their needs to carry personal belongings and obtain physical resistance. We have a team of four shareholders who have experience in different areas of the company. For this project we want to help children in a context of vulnerability, allocating 1% of sales. The product differs in quality, design, and customer satisfaction. As important points, the general aspects of the business are defined, the strategic planning and the research or market validation is demonstrated. Also, the marketing plan, operations plan, organizational structure, and human resources are developed. Finally, the financial plan will be explained, in which the project horizon is five years, the initial investment will be S / 215,920 financed 80% by shareholder capital and 20% by external capital through a bank loan. The unit sale price of the garment S / 119.00 in the first two years. The project is economically viable since the IRR of the freely available cash flow of 154.83% is greater than the COK of 10.38%. The project is financially viable since the investor's cash flow IRR of 166.52% is higher than the WACC of 13.95%. / Trabajo de investigación

This thesis examines the relationship between stock market returns and systematic risk factors in twelve industrial countries. Using the APT framework, the thesis investigates the notion of international stock market integration versus segmentation in terms of pricing risk, international stock market efficiency in terms of eliminating arbitrage opportunities across domestic markets, and the validity of the international version of the APT according to a model that specifies purely domestic factors. Starting with ordinary least squares estimation the thesis investigates the responses of investors in their national stock markets to systematic shocks. By employing iterative non-linear multivariate seemingly unrelated regression estimation, this work avoids the statistical problems encountered in the second-pass test of the two-stage procedure. This study found that the international stock market was neither integrated nor efficient and that the IAPT was not supported by the results during the period investigated. It was demonstrated that partial and regional integration, regional efficiency, and regional IAPT validity cannot be ruled out. Moreover, the alternative model proved to be practically valid. / United Arab Emirates University

No description available.

The dissertation consists of two essays. In the first essay, we measure herding by institutional investors in the new economy (internet) stocks during 1998-2001 by examining the changes in the quarterly institutional holdings of internet stocks relative to an average stock. More than 95% of the stocks that are examined are listed on NASDAQ. The second essay attempts to detect intra-day herding using two new measures in an average NYSE stock during 1998-2001. In the second essay, rather than asking whether institutional investors herd in a specific segment of the market, we endeavor to ask if herding occurs in an average stock across all categories of investors. The first essay analyzes herding in one of the largest bull runs in the history of U.S. equity markets. Instead of providing a corrective stabilizing force, banks, insurance firms, investment companies, investment advisors, university endowments, hedge funds, and internally managed pension funds participated in herds in the rise and to a lesser extent in the fall of new economy stocks. In contrast to previous research, we find strong evidence of herding by all categories of institutional investors across stocks of all sizes of companies, including the stocks of large companies, which are their preferred holdings. We present evidence that institutional investors herded into all performance categories of new economy stocks, and thus the documented herding cannot be explained by simple momentum-based trading. Institutional investors' buying exerted upward price pressure, and the reversal of excess returns in the subsequent quarter provides evidence that the herding was destabilizing and not based on information. The second essay attempts to detect herding in financial markets using a set of two methodologies based on runs test and dependence between interarrival trade times. Our first and the most important finding is that markets function efficiently and show no evidence of any meaningful herding in general. Second, herding seems to be confined to very small subset of small stocks. Third, dispersion of opinion among investors does not have much of impact on herding. Fourth, analysts' recommendations do not contribute to herding. Last, the limited amount of herding on price increase days seems to be destabilizing but on the price decrease days, the herding helps impound fundamental information into security prices thus making markets more efficient. Our results are consistent with Avery and Zemsky (1998) prediction that flexible financial asset prices prevent herding from arising. The seemingly contradictory results of the two essays can be reconciled based on the different sample of stocks, and the different methodologies of the two essays which are designed to detect different types of herding. In the first essay, herding is measured for NASDAQ-listed (primarily) internet stocks relative to an average stock, while the second essay documents herding for an average stock. In the first essay, we document herding in more volatile internet stocks, but we do not find any evidence of herding in more established NYSE stocks. The first essay examines herding by institutional investors, while the second essay examines herding, irrespective of the investor type. Consequently, in the first essay, we find that a subset of investors herd but in the second essay market as a whole does not exhibit any herding. Moreover, the first essay measures herding by examining the quarterly institutional holdings of internet stocks, while the second essay measures herding by examining the intra-day trading patterns for stocks. This suggests that it takes a while for investors to find out what others are doing leading to herding at quarterly interval but no herding is observed at intra-day level. The evidence presented in the two essays suggests that while institutional investors herded in the internet stocks during 1998-2001, there was very little herding by all investors in an average stock during this period. / Ph. D.

This dissertation examines the characterization of transient investors by financial analysts. Transient investors have been portrayed in the literature as either 1) informed investors or 2) poor monitors. No research to date, however, has examined how financial analysts, who are important information intermediaries, characterize transient investors. A view of transient investors through the lens of a financial analyst is obtained through examining how the presence of transient owners in a firm affects financial analysts' decision making. Specifically, this study examines how transient ownership affects both the propensity of analysts to herd when issuing earnings forecasts for a given firm as well as the incidence with which analysts revise their forecasts when the firm issues earnings guidance. Empirical tests show that financial analysts exhibit a greater propensity to herd when there are transient investors present. The proposed reason for this effect is analysts are herding due to reputational concerns. Further testing, however, does not show that the relation between transient ownership and analyst herding is owed to poor monitoring behavior of transient-owned firms. In contrast, evidence is consistent with the hypothesis that the firm information environment of transient-owned firms is an important cause of analyst herding. In summary, evidence is consistent with the informed investor portrayal of transient investors and there is no evidence indicating financial analysts view transient owners as poor monitors. Finally, when the decision of analysts to issue revised forecasts is examined, it is found that having a higher percentage of the firm owned by dedicated or long-term investors increased the propensity of analysts to issue a revised forecast. Thus, while my analysis is inconsistent with a poor monitoring portrayal of transient investors, results suggest that a dedicated investor base can enhance the perceived credibility of firm disclosures. / Ph. D.

No / The usefulness of technical analysis, or charting, has been questioned because it flies in the face of the ‘random walk’ and tests present conflicting results. We examine chartists’ decision-making techniques and derive a taxonomy of charting strategies based on investors’ market ontologies and calculative strategies. This distinguishes between trend-seekers and pattern-seekers, and trading as a system or an art. We argue that interpretative activity plays a more important role than previously thought and suggest that charting’s main appeal for users lies in its power as a heuristic device regardless of its effectiveness at generating returns.