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Ongoing Projects

Get to know our research programmes and find out about the current state of our ongoing projects:

Household and Behavioral Finance

  • Inhalt ausklappen Inhalt einklappen Good brand image = good share?Good brand image = good share?

    The subject of a current research project by Anna-Lena Bauer and Prof. Dr. Stolper at the interface of brand management and investor behaviour is the question whether private households are influenced not only by their role as consumers but also by the brand image of a company in their investment decisions and thus a brand bias can be observed. In particular, it will be investigated whether and to what extent shares of companies whose products and services have a particularly good brand image among German consumers are significantly overweighted in the securities portfolios of private households in Germany.

  • Inhalt ausklappen Inhalt einklappen "Equals among equals" in peer-to-peer lending: What effect do similarities between lenders and borrowers have on online investments?"Equals among equals" in peer-to-peer lending: What effect do similarities between lenders and borrowers have on online investments?

    This research project examines for the first time the role of social homophilia - the tendency to interact with similar people - in the context of peer-to-peer (P2P) lending. P2P Lending enables private investors to lend money to other private individuals. This happens via direct interaction on P2P platforms - traditional intermediaries, such as banks, are not required. Results show that there is a robust and significant influence of demographic and geographic similarities (age, gender, place of residence) in the selection of loan applications in which investors in a large German P2P platform invest: the more similar the lender and borrower are, the more likely it is that an investment will take place. The amount invested also increases measurably as the similarity between lender and borrower increases. This effect of social homophily is stronger among female investors on the platform than among male investors. In addition, it can be shown that investors earn a lower interest rate with those financed projects in which there is a higher similarity between lender and borrower. Whether the observed homophily effect is rational behaviour or whether it escapes the investor's conscious control remains an exciting research question for follow-up projects.

  • Inhalt ausklappen Inhalt einklappen Do financial advisors influence the risk profile of private clients?Do financial advisors influence the risk profile of private clients?

    In this project Dr. Lukas Brenner in collaboration with Prof. Dr. Oscar Stolper investigates the influence of financial advisors on the investment behavior of private households. The central pillar of investment recommendations in standardized financial consulting is the process for the objective derivation of an investor's risk-bearing capacity profile by the financial consultant. This profile should be independent of the advisor and should be derived individually according to the life situation / asset situation as well as preferences and inclinations of the investor. However, findings of the study indicate that financial advisors (strongly) influence the risk profile of investors in the process. As a consequence, this leads to distorted product and investment recommendations by the advisor with far-reaching negative consequences for the investor.

  • Inhalt ausklappen Inhalt einklappen What influence do financial contributions from family and friends have on the investment behaviour of private households?What influence do financial contributions from family and friends have on the investment behaviour of private households?

    Two studies conducted as part of the research programme deal with the topic of how financial contributions from family and friends influence the investment behaviour of private households. The first study examines how households that inherit or receive gifts deal with the transferred assets. How does such an inflow influence the financial decisions of households - especially with regard to saving for private retirement provision? Our findings suggest that heirs use some of the money they receive to increase their private pension provision, but there are significant differences between heir households. "Many households will come across the issue of inheritance over time. In Germany in particular, it will be interesting to see whether and how this inflow of funds influences citizens in their financial investment decisions - for example on the capital market or for old-age provision. It will be important for legislators, as well as for financial institutions, to correctly anticipate the financial decisions of thousands of affected households and to set the appropriate course". The second study addresses the issue of how (promised) financial support from the closest social circles influences the investment behaviour of private households. For example, do households that can rely on a social safety net from friends and family take a higher risk on the capital market? Building on current findings in the emerging field of social finance, the study suggests a link between such promised financial support and investment in high-risk asset classes.

Mutual Funds and fund managers

  • Inhalt ausklappen Inhalt einklappen Is mutual fund product information comprehensible for the average investor?Is mutual fund product information comprehensible for the average investor?

    With the introduction of short-form key investor information documents (KIIDs) for mutual funds in 2012, the European financial regulation underlines the importance of using simple and easy to understand language in financial product information disclosure. The objective is to provide private investors with easier and more transparent access to product information. We evaluate whether these documents and the accompanying "plain language guidelines" affect the readability of product information for mutual funds. Applying textual analytics on a large-scale sample of all mutual funds registered for sale in Germany, we are the first to quantitatively benchmark the readability of product information for retail investors on a large scale. While fund information qualifies as very difficult to read requiring up to 15 years of education, we find that readability improved following recent disclosure regulations. Improvements are driven by simpler syntax and writing style. Still, we identify an increase in use of jargon and non-compliance with mandatory design requirements. We discuss our results and propose potential disclosure improvements.

    The study Double Dutch Finally Fixed? A Large-Scale Investigation into the Readability of Mandatory Financial Product Information (Scheld, Stolper & Walter, 2021) documents the project and is published in the Journal of Consumer Policy 44 (2).

    This project is funded by the Fritz Thyssen Stiftung.
  • Inhalt ausklappen Inhalt einklappen How do local disclosure interventions on funds’ "activeness" affect investors and fund providers?How do local disclosure interventions on funds’ "activeness" affect investors and fund providers?

    The performance and costs of a fund should be transparent to investors. While costs of an mutual funds need to be transparently disclosed ever since, performance is only published in the form of achieved returns, which, according to existing literature, does not necessarily provide indications on future fund performance. Especially for investors in actively managed funds, it is of immanent interest whether the fund management has historically tried to "actively" beat the market. As of April 2018, several of the largest U.S. mutual fund firms have been imposed to disclose a measure of fund manager activeness to retail investors. We evaluate investors’ reaction and the supply-side response to this intervention. We find that investors are not rationally trading on this new information, but are rather subject to a media attention effect. Moreover, we observe that the intervention did neither affect suppliers in its intended way. Even for those funds with a large overlap of holdings with the benchmark, no measurable effort to increase management activeness can be observed subsequent to the imposed disclosure. We discuss our results and propose potential disclosure improvements.

    This project is funded by the Fritz Thyssen Stiftung.

  • Inhalt ausklappen Inhalt einklappen How does strategic "signaling" of mutual fund managers affect private investors’ asset allocation?How does strategic "signaling" of mutual fund managers affect private investors’ asset allocation?

    "Skin-in-the-Game" (SitG), indicating a fund manager’s private investment in her own funds, allows to align interests of fund managers and investors. Since 2005, US fund managers have been obliged to disclose their shares in self-managed funds. However, the information can be considered inaccessible to private investors, as it is neither standardized nor transparently disclosed to them. We use a different, yet more salient channel through which SitG is often signaled: the funds’ letter to the shareholders (LS). Although LS usually do not allow to infer the exact investment of the manager to, they do provide a verbal indication of whether personal shares are held by the fund management. Using textual analysis on a large sample (~16,000 observations) of mutual funds’, we are the first to show that investors trade on the verbal commitment of fund managers in the LS. We find significant inflows of funds by private investors in direct connection with the publication of LS that communicate SitG verbally. In contrast, investors do not react on the actual amount invested by portfolio as required to be disclosed by the SEC. Our findings highlight the increasing need for regulators to focus on not only content, but also the format of disclosure requirements.

    This project is funded by the Fritz Thyssen Stiftung.

  • Inhalt ausklappen Inhalt einklappen Investment funds: actively managed and yet only passively invested?Investment funds: actively managed and yet only passively invested?

    In the project "Affiliated mutual funds: beyond the reach of the invisible hand?" Prof. Dr. Oscar Stolper, Prof. Dr. Andreas Walter and Kim Heyden are investigating how the distribution channels of investment funds affect the activity of fund managers. In many countries banks are the main distribution channel for funds and they primarily sell the funds of their own investment company ("affiliated funds"). "Affiliated funds" are exposed to less competitive pressure due to this exclusive distribution channel, as a result of which the activity of fund management in these funds is significantly lower. They also charge the same fees for funds with high and low management costs. In contrast, funds without an exclusive distribution channel charge lower fees for funds with less activity.

  • Inhalt ausklappen Inhalt einklappen How does narcissism affect fund management?How does narcissism affect fund management?

    In the project "Fund manager narcissim" Anna-Lena Bauer investigates , in collaboration with Prof. Dr. Stolper and Dominik Scheld, how personality traits affect the investment decisions of professional investors. In this context, the project examines narcissistic tendencies of fund managers. Using verbatim transcribed interviews with US-American managers, the project aims to i) identify narcissistic characteristics of fund managers using text analytical methods, ii) analyze their effects on portfolio management (e.g. risk-return ratio) and iii) investigate if and to what extent investors react to narcissistic fund managers.

  • Inhalt ausklappen Inhalt einklappen Which traits shape fund managers?Which traits shape fund managers?

    In the project "The Big5 in fund management" Anna-Lena Bauer investigates, in collaboration with Prof. Dr. Stolper and Dominik Scheld, the influence of the "Big 5" personality dimension on fund managers. In addition to a comprehensive typification of fund management, the project aims to quantify the influence of personality dimensions in the context of professional investments. The expected results of the project will allow insights on the "interiority" of fund managers and the potential connection between professional money management and psychological characteristics.

Empirical Capital Market Research

  • Inhalt ausklappen Inhalt einklappen Globally diversified despite focusing on domestic equity investments?Globally diversified despite focusing on domestic equity investments?

    Economic theory suggests that investors diversify their investments globally to minimize their risk. In practice, however, it has repeatedly been shown that investors prefer shares issued by companies in their home country ("home bias"), which from an academic point of view are supposedly irrational. In a current research project, Philipp Ritter and Prof. Dr. Stolper are investigating whether the home bias is actually associated with the assumed risk concentration or whether a globally diversified equity portfolio can also be formed with domestic equity investments.

    "Households worldwide tend to invest in shares of domestic companies ("home bias"), potentially exposing them to higher risk concentration as compared to an internationally diversified portfolio. Both investors and product developers are interested in whether or not the home bias is detrimental."

  • Inhalt ausklappen Inhalt einklappen What information is contained in short volatility trades?What information is contained in short volatility trades?

    In this project Michel Bartoschik in collaboration with Prof. Dr. Stolper investigates, the predictability of the aggregated short interest positions in derivatives, that are based on the volatility index VIX as an underlying, on future returns. Based on the insights gained in the project, statements about the efficiency of the volatility market and the economic rationale for trading "short volatility" products is derived.