Below is a list of upcoming seminars in finance and economics being hosted by the School of Finance and Economics. All seminars unless stated otherwise are held from 12-1 pm in:

Room D301

Level 3, Block D

1-59 Quay St

Ultimo, Sydney

Australia

Access to seminars is by invitation. Please contact Lakmali Dias on +61 2 9514 7713 for further details.

Should you want to present a paper at our seminar series then please contact:

Dr Susan Thorp

School of Finance and Economics

University of Technology, Sydney

PO Box 123

Broadway, NSW 2007

Australia

Ph: +61 2 9514 7784

Fax: +61 2 9514 7711

E-mail: Susan.Thorp@uts.edu.au

View a past seminar for:

Speaker:	Susanne Griebsch, School of Finance and Economics, University of Technology, Sydney
Title:	"A Stochastic Approach to the Valuation of Barrier Options in Heston's Stochastic Volatility Model"
Date:	19 June, 2009
Abstract:	In this study we derive (semi-)analytical solutions for the value of continuous barrier options in the presence of stochastic volatility. First we focus on the case where the underlying asset price evolves according to Heston's stochastic volatility model and restrict the interest rate spread as well as the correlation to be equal to zero. In the second part we show how approximation formulas for barrier options in the Heston model with an arbitrary interest rate spread and specific correlation structures can be obtained. We compare our approach with other numerical pricing techniques.

Speaker:	Kristoffer Glover, School of Finance and Economics, University of Technology, Sydney
Title:	"Path Dependent British Options"
Date:	19 June, 2009
Abstract:	We examine the British payoff mechanism (introduced in Peskir and Samee, 2008) in the context of path dependent options. In particular, we focus on the ‘British Asian’ and the ‘British Russian’ option. Such options provide their holder with an endogenous protection against unfavourable stock price movements. The price of such options can be characterised as the unique solution to a parabolic free-boundary problem, whose properties and solution we investigate. Finally, we provide a preliminary financial analysis of both options and conclude that in many circumstances these options can be considered an attractive alternative to existing path dependent options.

Speaker:	Ric Herbert, University of Newcastle
Title:	"Computationally Solving the Key Dynamics of Macroeconomic Models"
Date:	17 June, 2009
Abstract:	In this presentation I ask the question of why it is difficult to obtain accurate computational solutions to dynamic economic models. I build a parsimonious economic model based on standard methods which contains the components that generate the key dynamics and show that it is difficult to accurately solve such models on a computer. I use state-of-the-art scientific algorithms and software and follow best practice approaches. Despite this I show that inaccurate results can be obtained for the model. This has implications for larger and more complex models. The dynamic model has the feature that after an exogenous shock some variables 'jump' so that it moves onto the stable manifold and evolves to a new equilibrium. For non-linear models computational solutions are necessary. Generating the transient dynamics can be considered as a two-point boundary value problem. Many economic modellers use computational approaches based on shooting methods for solving this problem and in this presentation I focus on shooting methods.

Speaker:	Andrew Ellul, Indiana University
Title:	"Do Financial Analysts Restrain Insiders’ Informational Advantage?"
Date:	10 June, 2009
Abstract:	We investigate the competitive relationship between financial analysts and firm insiders for price-sensitive information and its influence on liquidity and price discovery. Without the presence of analysts, insiders have complete monopoly over information. If analysts compete for information (as in Fishman and Hagerty, 1992) they can reduce insiders’ informational advantage with a consequent improvement of traders’ welfare (as in Holden and Subrahmanyam, 1992). We empirically investigate this hitherto ignored role of analysts by using stocks that lost all analyst coverage, giving insiders complete monopoly over price-sensitive information. The departure of analysts, a highly publicized event, leads to important changes in liquidity and market equilibrium. Using a matching-firm methodology to address possible endogeneity, we find that liquidity decreases significantly, price efficiency deteriorates rapidly, information asymmetries increase, and institutional shareholders and liquidity-motivated traders leave the stock. Insiders’ negative impact on adverse selection costs and price efficiency becomes larger after termination. At the same time, insiders’ trades become more profitable. This evidence suggests that analysts make a significant contribution to market quality by competing with insiders for price-sensitive information.
Paper:	Download, Format: PDF, Size: 573 Kb

Speaker:	Jock Collins, School of Finance and Economics, University of Technology, Sydney
Title:	"Attraction and Retention of New Immigrants in Regional and Rural Australia"
Date:	3 June, 2009
Abstract:	Australia is one of the most significant immigration countries in the world today. Australian immigration intakes reached record levels over the past decade, responding to labour shortages generated during the economic boom following the recession of the early 1990s. Most Australian immigrants have settled in the metropolitan areas of Australia’s cities, particularly on the east coast. However, since mid 1990s Australian immigration policy introduced, for the first time in over sixty years, a range of new visas designed to attract more immigrants to ‘the bush’ as regional and rural Australia is colloquially known. This was partly in response to the labour shortages in regional and rural Australia, estimated at over 100,000 prior to the current recession, and partly in response to the environmental critique of urban immigration, particularly by the former NSW Premier, Bob Carr. This paper provides a background to this development, often called regionalisation, in Australia before presenting the results of a national survey, conducted in 2008-9, of nearly 1000 recent immigrants who have settled in regional and rural Australia. This survey was the first phase of a three year research grant funded by the Rural Industries Research and Development.

Speaker:	Ron Bird
Title:	"The Impact of Ambiguity on the Market Response to Announcements: Australian and US Findings"
Date:	27 May, 2009
Abstract:	It has long been well-accepted in finance that risk plays an important part in valuation where risk reflects that that we do not know future returns but that we do have prior expectations as to their distribution. Knights (1921) introduced the concept of ambiguity/uncertainty where we possess incomplete knowledge about this distribution and so are unable to formulate priors over all possible outcomes. A number of writers (Gilboa and Schmeidler, 1989; Epstein and Schneider, 2003) have developed models that suggest that ambiguity combines with risk to have a negative impact on price. Consistent with the empirical evidence (Ellsberg, 1961), these models typically assume that investors when faced with ambiguity take a conservative approach and pursue a course of activity based on the worst case scenario (maximin). Given the potential impact on ambiguity, it has received relatively little attention in the finance world although this seems to be in the process of changing (Epstien and Schneider,2008). One area of particular interest is how the market faced with ambiguity reacts to the receipt of new information. The proposition being that the greater the level of ambiguity, the worse the interpretation that the market will place on any information received. The implication being that they will upgrade any bad news and downgrade any good news when there is a high level of ambiguity in the market. Williams (2009) uses changes in the VIX (i.e. implied market volatility) as a measure of market ambiguity in his US study where he evaluates the markets response to the release of earnings news. There is a plethora of evidence going back to Ball and Brown (1968) that the market responds positively to good news and negatively to bad news. Williams found that this reaction is conditioned by market ambiguity with there being the predicted asymmetric reaction to good and bad news – the negative reaction to bad news increasing with ambiguity and the positive reaction to good news decreasing. He finds that this result is robust to both risk and investor sentiment explanations and is intensified for firms with a high systematic component in their earnings but is mitigated for firms that experience high trading volume at the time of the information release. In this study we both duplicate and extend the Williams study using Australian data. In general our findings are the same if not than those of Williams. One area in which we differ from the Williams’ findings is that we find that the “ambiguity effect” is greater for those firms that experience high volume at the time of their information release. We extend the William’s study to examine the post-announcement impact of ambiguity and find a stronger (lesser) PEAD for firms that release “good” (“bad”) news at a time of high ambiguity. Further, these findings are intensified when the firms are further split on the basis of their recent market momentum. Finally, we examine the extent to which the findings are robust to different definitions of earnings surprise and ambiguity.

Speaker:	Steffen Lippert, Department of Economics, Massey University
Title:	"Venture Capitalists, Asymmetric Information, and Ownership in the Innovation Process"
Date:	20 May, 2009
Abstract:	In this paper we construct a model in which entrepreneurial innovations are sold into oligopolistic industries and where adverse selection problems between entrepreneurs, venture capitalists and incumbents are present. We show that as exacerbated development by better-informed venture-backed firms is used as a signal to enhance the sale price of developed innovations, venture capitalists must be sufficiently more efficient in selecting innovative projects than incumbents in order to exist in equilibrium. Otherwise, incumbents undertake early pre-emptive, acquisitions to prevent the venture-backed firms' signalling-driven investment, despite the risk of buying a bad innovation. We finally show at what point the presence of active venture capitalists increases the incentives for entrepreneurial innovations.
Paper:	Download, Format: PDF, Size: 659 Kb

Speaker:	Qianqiu Liu, University of Hawaii at Manoa
Title:	"Another Look at Idiosyncratic Volatility and Expected Returns"
Date:	13 May, 2009
Abstract:	Bali and Cakici (2008) find no relation between equal-weighted portfolio returns and idiosyncratic volatility, whereas Ang et al. (2006, 2009) report a negative relation between value-weighted portfolio returns and idiosyncratic volatility. Our analyses of stock portfolios sorted by idiosyncratic volatility show strong return reversals in the highest idiosyncratic volatility portfolio, which contains mostly extreme winners and losers stocks. Short-term return reversals along with the relatively larger size of past winner stocks in the highest idiosyncratic volatility portfolio can explain the different findings. Return reversals are also the reason behind the positive relation between portfolio returns and idiosyncratic volatility in January.

Speaker:	Don Harding, La Trobe University
Title:	"A Unified Framework for Econometric Analysis of Constructed Binary Time Series"
Date:	6 May, 2009
Abstract:	We develop a unified framework for the econometric analysis of the constructed binary variables that are often featured in macroeconometric and finance literatures. We show that standard single index dynamic discrete choice models are invalid for such data for two main reasons. First, they violate the MLE regularity condition that requires the parameters to be elements of a compact set. Second, we show that such constructed data requires multiple index dynamic discrete choice models. We show that these theoretical considerations matter in practice in an application where we investigate the relation between the NBER business cycle and the yield spread.
Paper:	Download, Format: PDF, Size: 255 Kb

Speaker:	Chris Edmonds, Stern and University of Melbourne
Title:	"Aggregate Implications of Micro Asset Market Segmentation"
Date:	29 April, 2009
Abstract:	This paper develops a consumption-based asset pricing model to explain and quantify the aggregate implications of a frictional financial system, a system comprised of many financial markets partially integrated with one-another. Each of our micro financial markets is inhabited by traders who are specialized in that market’s type of asset. We specify exogenously the level of segmentation that ultimately determines how much idiosyncratic risk traders bear in their micro market and derive aggregate asset pricing implications. We pick segmentation parameters to match facts about systematic and idiosyncratic return volatility. We find that if the same level of segmentation prevails in every market, traders bear 20% of their idiosyncratic risk. With otherwise standard parameters, this benchmark model delivers an unconditional equity premium of 3.7% annual. We further disaggregate the model by allowing the level of segmentation to differ across markets. This version of the model delivers the same aggregate asset pricing implications but with only half the amount of segmentation: on average traders bear 10% of their idiosyncratic risk.

Speaker:	Regina Betz, School of Economics, University of New South Wales
Title:	"Who Is Out and Who is In?: Efficient inclusion of installations in an Emissions Trading Scheme"
Date:	22 April, 2009
Abstract:	Regulators around the world are currently designing national emissions trading systems. In the process, they are confronted with numerous design issues. The coverage of installations is one such issue. While “blanket coverage” that includes all industrial emitters of greenhouse gases in an economy has some intuitive appeal, and seems equitable, may not be the most efficient approach when taking all the transaction costs into account related to the policy. This paper shows that an alternative approach of “efficient coverage” can achieve the same emission reduction outcome at lower social cost. In particular, for relatively modest emissions reduction targets the cost savings are significant.

Speaker:	Michael Brennan
Title:	"Institutional Investors; Agency and Asset Prices"
Date:	15 April, 2009
Time:	5.15-6.15 pm
Room:	B112

Speaker:	Warren Hogan, School of Finance and Economics, University of Technology, Sydney
Title:	"Guaranteeing Liabilities: Deposits and Funds"
Date:	15 April, 2009
Paper:	Download, Format: PDF, Size: 45 Kb

Speaker:	Alexandre Dmitriev, School of Economics, University of NSW
Title:	"An Algorithm for Computing Partial Derivatives of the Value Function by Simulation"
Date:	8 April, 2009
Abstract:	The problems involving incentive compatibility constrains in the form of participation constrains have received wide attention in the literature due to the recent advances in the dynamic optimization techniques. Often the optimality conditions for this class of problems involve partial derivatives of the optimal value function with respect to some of the endogenous state variables. In this note we suggest an algorithm for computing these partial derivatives by simulation. The attractive features of the algorithm include its rather wide scope of applicability and simplicity of implementation. Furthermore, the suggested method does not su§er from the curse of dimensionality and therefore it is particularly convenient for the models involving many state variables.
Paper:	Download, Format: PDF, Size: 327 Kb

Speaker:	Richard Finlay, Reserve Bank of Australia
Title:	"Option Pricing with VG–Like Models"
Date:	1 April, 2009
Abstract:	We relax separately two assumptions regarding the Variance Gamma (VG) process and price options accordingly. In the case of the Di?erence of Gammas model we achieve a better ?t to market data than achieved by other comparable models. In the case of the long range dependent VG model, we ?nd that the current “skew-correcting” approach to pricing options has shortcomings, and identify a number of model characteristics (?exible skewness, dependence of squared returns, accommodation of the leverage e?ect) which appear to be important in achieving a good ?t to market data.

Speaker:	Lilian Ng, University Of Wisconsin-Milwaukee
Title:	"Informed Trading Around The World"
Date:	25 March, 2009
Abstract:	This study exploits a rich, newly available global Taqtic dataset to examine whether and how informed trading varies across 27,042 firms from 42 countries worldwide for the period 1996 to 2007. It further examines whether and to what extent informed trading contributes to stock price informativeness. Our study employs Easley, Kiefer, and O'Hara's (1997) probability of informed trading (PIN) as a proxy for private information-based trading. Results show strong evidence of a cross-country variation in PIN and of its strong association with variables that are widely employed as firm- and country-level information proxies. PIN also plays a significant role in stock price informativeness. Contrary to the prevailing view, informed trading is more pronounced in emerging than in developed markets. Stock prices, however, are more informative in the developed than emerging markets. Varying degrees of financial transparency contribute to these cross-market differences in PIN and stock price informativeness. Specifically, increasing financial transparency at both firm and country levels helps reduce informed trading but increase price informativeness.
Paper:	Download, Format: PDF, Size: 379 Kb

Speaker:	Christian Schlag, Department of Finance, University of Frankfurt
Title:	"CAPM with Option-Implied Betas: Another Rescue Attempt"
Date:	18 March, 2009
Abstract:	We test the conditional CAPM with time-varying forward-looking betas, assuming a two-state model for the market risk premium. For market state identi?cation we employ a recursive Markov-switching model based on a forward-looking Sentiment factor. The empirical results for our sample of S&P500 constituents for the period from 1996 to 2007 show that in ’good’ states of the economy the classical CAPM with just the market factor is able to explain the cross-section of expected returns very well, while in ’bad’ states ?rm characteristics like size and book-to-market become relevant. Our estimated probabilities for good and bad states are furthermore able to predict the market risk premium one period into the future.
Paper:	Download, Format: PDF, Size: 660 Kb

Speaker:	Abigail Brown, School of Finance and Economics University of Technology, Sydney
Title:	"The Social Welfare Cost of Fraud"
Date:	11 March, 2009
Abstract:	Surprisingly little research has been done on the effects of misinformation in financial statements (due either to fraud or less nefarious reasons) on the real economy. This paper helps address this oversight by considering how misinformation about competitors' profits might lead a firm to make misguided decisions when it updates its strategy each period. We use an agent-based model to show that misinformation might significantly slow firms' ability to learn about consumer preferences and, in some special cases, may actually cause firms' production decisions to diverge from consumer preferences over time.
Paper:	Download, Format: PDF, Size: 2.1 Mb

Speaker:	Bing-Xuan Lin, University of Rhode Island
Title:	"Measuring the Information Environment of Biased Forecasts: A Re-examination of the Information Content around Earnings Announcements "
Date:	4 March, 2009
Abstract:	Previous studies suggest that analysts are overconfident when making forecasts (Chen and Jiang 2006; Zhang 2006; DeBondt and Thaler 1990). We extend this intuition and broaden the measure of information content devised by Barron et al. (1998) to a more general setting in which analysts irrationally weigh public and private information in making forecasts. We propose a model to estimate the actual (biased) weights and the theoretical (unbiased) weights of the private and public information contained in analyst forecasts. We then apply the model to re-examine the information content of analyst forecasts around earnings announcements, and find that analysts overweight private information after earnings announcements, and that the proportion of private information in analyst forecasts decreases significantly after these announcements.
Paper:	Download, Format: PDF, Size: 701 Kb