In the summer term 2023, we will be offering a master level seminar.

The last fifteen years have seen a flurry of research papers that suggest models for predicting aggregate stock market returns and that conclude that it is possible to achieve a superior investment performance by trading on these forecasts..  A paper  to be pubished in the Critical Finance Review shows that the benefits of the return forecasts are often smaller or less obvious than suggested.  There are two reasons for this:  Many studies do not compare investment performance to a simple buy-and-hold strategy, even though this strategy usually leads to better results than the benchmark commonly used in the literature. Moreover, most studies do not test whether the investment performance is statistically significantly better than the benchmark.

Over the past 100 years, value stocks have outperformed other stocks.  But over the last decade, they have underperformed. Could this be due to increased investor interest in value investing? A study forthcoming in the Journal of Behavioral Finance shows that such fluctations in interest and value premia are nothing new.  It is therefore not obvious that more investor interest will lead to a disappearance of the value effect.

Despite intense criticism, agency credit ratings are still widely used in regulation and risk management. One possible alternative is to replace them with quantitative default risk measures. In a study that is forthcoming in the Journal of Financial Services Research, Prof. Löffler shows that using such measures would reduce systemically relevant losses in bond portfolios and thus help to improve financial stability.