Through the lens of market participants' objective to minimize counterparty risk, we provide an explanation for the reluctance to clear derivative trades in the absence of a central clearing obligation. We develop a comprehensive understanding of the benefits and potential pitfalls with respect...

We exploit a modification to Sustainalytics' environmental, social, and governance (ESG) rating methodology, which is subsequently adopted by Morningstar, to study whether ESG ratings are salient for stock pricing. We show that the inversion of the rating scale but not new information leads some...

This paper studies the impact of environmental, social, and governance (ESG) ratings on investors' preferences and stock prices. We exploit a change in ESG rating methodology that non-linearly shifted ESG ratings for firms as a natural experiment. We show that the 'pseudo'-changes in the ESG...

Cross-predictability denotes the fact that some assets can predict other assets' returns. I propose a novel performance-based measure that disentangles the economic value of cross-predictability into two components: the predictive power of one asset's signal for other assets' returns...

This paper studies whether Eurosystem collateral eligibility played a role in the portfolio choices of euro area asset managers during the "dash-for-cash" episode of 2020. We find that asset managers reduced their allocation to ECB-eligible corporate bonds, selling them in order to finance...

Fund companies regularly send shareholder letters to their investors. We use textual analysis to investigate whether these letters' writing style influences fund flows and whether it predicts performance and investment styles. Fund investors react to the tone and content of shareholder letters:...

We relate time-varying aggregate ambiguity (V-VSTOXX) to individual investor trading. We use the trading records of more than 100,000 individual investors from a large German online brokerage from March 2010 to December 2015. We find that an increase in ambiguity is associated with increased...

Using German and US brokerage data we find that investors are more likely to sell speculative stocks trading at a gain. Investors' gain realizations are monotonically increasing in a stock's speculativeness. This translates into a high disposition effect for speculative and a much lower...

In the last decade, central bank interventions, flights to safety, and the shift in derivatives clearing resulted in exceptionally high demand for high quality liquid assets, such as German treasuries, in the securities lending market besides the traditional repo market activities. Despite the...

This paper studies the impact of banks’ dividend restrictions on the behavior of their institutional investors. Using an identification strategy that relies on the within investor variation and a difference in difference setup, I find that funds permanently decrease their ownership shares at...