Empirical capital-market studies on share sensitivity to interest rates – especially referring to financial service companies – regularly draw on variations of a two-factor regression model that explains returns on shares using a market and an interest-rate factor. In the literature, this...

This article examines the interest-rate sensitivity of listed financial service companies in the German capital market based on the fundamental approach developed by Stone (1974). This means using a market and an interest-rate factor for explaining returns on shares, whereas empirical studies...

Economic theory postulates that financial institutions are exposed to a significant interest rate risk which is largely due to their engagement in maturity transformation. Although this maturity transformation and the associated risk is of interest to all stakeholders of financial institutions,...

This paper presents the first analysis of open-end leverage certificates on the German market. The major innovations of these certificates are twofold. First, issuers announce a price-setting formula according to which they are willing to buy and sell the certificates over time. Second, the...

We investigate here the sensitivity of the stock returns of German financial institutions to changes in the shape of the term structure of interest rates. The standard approach has been to measure the interest rate sensitivity of stock returns by focussing solely on changes in a single interest...

Theory predicts that market timing in managed portfolios biases Jensen's alpha. However, empirical studies have failed to find evidence this bias actually exists. We tackle this puzzle by showing via a nested model approach and various simulations that, for the bias to become economically...

This article analyses the impact of market climates on the Sharpe ratios (SRs) of funds. On the basis of a common factor model, we derive analytically how market climates impact the SR ndash; taking into account the abilities of fund managers. This applies especially to the mean of the market...

In 1997, Modigliani and Modigliani developed the risk-adjusted performance measure RAP (often called M-squared) which is by now widely accepted in theory and practice. Their measure has further increased investorsiquest; awareness of risk-adjusted performance measurement. However, this measure...

This article defines the investor-specific performance measure ISM necessary for investors in practically relevant decision situations. In such situations a typical investor creates an overall portfolio consisting of three parts: an arbitrary fund, a risk-free asset and an existing, fixed...