How does regulatory uncertainty affect the valuation of assets and investment decisions? This question is at the centre of a new research group that was recently approved by the German Research Foundation. A total of seven female scientists - an all-female team - have around 3.2 million euros at their disposal for four years. The spokesperson is Professor An Chen from Ulm University. 

In April, US President Donald Trump's threat to impose massive tariff hikes terrified the governments of many countries. Stock exchanges and financial markets are also going crazy. Investors all over the world are unsettled. Even after the current tariff agreement with the EU, the question remains: what happens next? "This is a good example of how regulatory uncertainty can affect investment strategies and asset pricing," explains Professor An Chen, Head of the Institute of Insurance Science at Ulm University. The internationally prestigious expert in Actuarial Science and Asset Allocation is the spokesperson for the new Research Unit FOR 5583 of the German Research Foundation (DFG). 

The DFG Research Unit is entitled "Asset Allocation and Asset Pricing in Regulated Markets and Institutions". The group, in which a total of seven female scientists from six universities are involved, is researching in five sub-projects how a lack of clarity or predictability of economic policy regulations affects investment decisions and the valuation of assets. "Regulatory uncertainty exists when the timing and scope of planned or likely economic policy regulatory measures, such as tariffs or taxes, are unknown," says Chen. The research group is investigating this for three fields: firstly, for different sectors such as the financial market, the insurance industry and trade; secondly, for the area of climate policy, which is characterised by regulatory measures such as the CO2 tax or emissions trading; and thirdly, for the tax system. "We are now specifically interested in how regulatory unpredictability influences the valuation of assets such as shares, bonds and other financial products and changes their attractiveness for investors," explains Professor Nicole Bäuerle from the Institute of Stochastics at KIT. The financial mathematician is vice spokesperson of the research group. 

The topic of the research project is highly relevant. "In times of political, economic and technological uncertainty, regulatory uncertainties quickly materialise as systemic risks. There is a risk of spillover effects that can spread across many sectors," emphasise the researchers. The project is also highly innovative in terms of methodology, as it combines theoretical-mathematical modelling and empirical-statistical measurement. From stochastic optimisation and statistical learning methods to the use of unstructured data such as texts - the scientific tools are tailored to the project and the result of close interdisciplinary collaboration. 

The team consists of economists and mathematicians, experts in finance, insurance and taxation, Actuarial Science and econometrics. "We have been working together for many years and complement each other perfectly. Over time, we have realised that we not only have many scientific points of contact with each other. We also share the same mindset and have a lot in common personally," confirm the female scientists. In addition to An Chen and Nicole Bäuerle, the team also includes Professors Nicole Branger (University of Münster), Monika Gehde-Trapp (University of Tübingen), Antje Mahayni (University of Duisburg-Essen), Melanie Schienle (KIT) and Caren Sureth-Sloane (University of Paderborn). 

"We are very pleased that the German Research Foundation is funding this research group. And of course we are proud that the consortium is being led from Ulm," emphasises University President Professor Michael Weber. Ulm researchers such as Professor An Chen are among the world leaders in actuarial and insurance sciences as well as in the field of asset allocation. 

Definition 
Asset allocation is translated into German as Vermögensallokation or Anlagenaufteilung. This refers to the strategic distribution of assets across different asset classes, such as bonds, property and commodities. 
Asset pricing refers to the process by which the value of assets such as shares, bonds or property is determined. This essentially depends on supply and demand. 

DFG Research Group 
Research groups are a special funding format of the German Research Foundation (DFG) for a close working alliance of several outstanding scientists who work together on a research task. The prerequisite for approval is the scientific quality and originality of the research project. The close - usually interdisciplinary - collaboration is intended to last several years. Funding in this format is considered an honour that certifies that the participants are conducting research at an international level.

Further information: Prof An Chen, Institute of Insurance Science

Text and media contact: Andrea Weber-Tuckermann