Stock prices tend to adjust slowly to the information contained in earnings announcements. After a positive (negative) earnings surprise (defined as the difference between actual and expected earnings), stock prices tend to drift upward (downward) for up to one year. This phenomenon is referred to as the post-earnings-announcement drift (PEAD). This project's main contribution to research into PEAD is the use of laboratory experiments. In three separate papers, the project will investigate (1) the most prominent explanation from the literature for why PEAD occurs - earnings autocorrelation, (2) whether limits to arbitrage prevent the elimination of PEAD, and (3) how share prices adjust to the information contained in the announcements, and how institutional features of the market, details of trader behavior and the timing of the earnings announcement affect the adjustment of prices.
Funding: Austrian Science Fund
Research group: Stefan Palan, Erik Theissen, Jürgen Brandner, Josef Fink
This project studies the impact of insider trading on markets. The topics under research include how insiders' presence and trading activity influence the efficiency of prices, the profitability of insiders' and non-insiders’ investments, how insider regulation affects these relationships and how regulators can detect insiders.
Funding: Austrian National Bank (OeNB)
Research group: Robert Merl, Stefan Palan, Dominik Schmidt, Thomas Stöckl
This project studies the way securities are actually traded on financial markets with a special focus on market liquidity and efficiency. The main research areas include: (i) An in-depth analysis of the liquidity of the Austrian stock market, based on “Finance Research Graz Data Services” (FiRe Graz DS) – Link: banken-finanzierung.uni-graz.at/de/datenbank-finance-research-graz-data-services-fire-graz-ds/ (ii) Algorithmic and high-frequency trading, (iii) Market reactions to news.
Funding: Partly funded by the Anniversary Fund of the Austrian National Bank (OeNB)
Research group: Roland Mestel, Viktoria Steffen, Corinna Uhlenkamp, Erik Theissen
This project which is interdigitated with the former studies cryptocurrencies as a new asset class and focuses on the different channels these currencies can be transferred (on-chain versus off-chain). The main research areas include: (i) Price efficiency and liquidity on cryptocurrency trading platforms, (ii) Microstructure of crypto-markets, (iii) Interdependences between on-chain and off-chain trading of cryptocurrencies
Research group: Roland Mestel, Erik Theissen; Alexander Brauneis (https://www.aau.at/team/brauneis-alexander/), Ryan Riordan (https://smith.queensu.ca/faculty_and_research/faculty_list/riordan-ryan.php)
Studying bank risk governance is particularly relevant given the ongoing debate on whether bank governance failures caused the recent financial crisis. Therefore, this project focuses on bank risk governance, which differs substantially from non-bank governance, and its interplay with banking regulation. Several dimensions of this interplay are studied. First, money laundering infractions of internationally active banks are employed to study when and how these infractions are affected by local and foreign regulators. Second, banks in dual banking countries are used to investigate how the introduction of banking regulations, especially with respect to the Basel disclosure requirements, affects banks’ risk governance structures.
Research group: Andrea Schertler, Sandra Tillema (University of Groningen), Amal AlAbbad (LaPenta School of Business, USA)
Large, internationally active banks play a special role in the (international) financial system because they are closely connected to their governments due to large sovereign bond holdings and because they transmit shocks easily from one country to another. This project focuses on several roles that internationally active banks may play in the financial system. First, sovereign rating downgrades are used to test whether banks spill over shocks from one country to another through their various types of foreign asset holdings, such as foreign sovereign debt holdings and foreign claims to banks. Second, the most recent COVID crisis is used to investigate how the change in banks’ risk profile is moderated by their governments’ creditworthiness due to the guarantee channel which is in place between banks and governments.
Research group: Michael Kueschnig, Andrea Schertler, Nils Moch (University of Lüneburg)
Return and risk are two fundamental aspects in financial decision-making, yet while researchers in various fields have studied interactions between preferences and investment behavior, the link between the two, namely perceptions of risk and return, have received far less attention.
This project remedies this gap in the literature by studying the role of perception in finance, with a particular focus on risk perception by retail investors. It is the aim of the project team to provide contributions which have the potential to improve financial decision-making by retail investors and thus improve people's long-term finances.
Research group: Stefan Palan, Berivan Gürel
As part of an interdisciplinary research project led by the Wegener Center for Climate and Global Change the Institute identifies required actions that are essential for the financial system to support the low carbon transition of the Austrian economy. Based on the foundations of the 2018 EU Commission’s Action Plan on Financing Sustainable Growth, comprising (i) the EU Taxonomy Regulation, (ii) a comprehensive disclosure regime for financial institutions and financial products, and (iii) a set of investment tools, including benchmarks, standards and labels that help financial market participants to align their investment strategies with the EU’s climate and environmental goals, requirements for climate related disclosures of SMEs are specified and instruments and policies that enable enterprises to finance capital expenditures required to implement their transition strategies are analysed.
Research group: Roland Mestel, Michael Kueschnig