Finance Research Graz (FiRe)

FiRe Graz is the finance research platform of the University of Graz. Founded and operated by the Institute of Banking and Finance, the platform is open to all finance researchers with a connection to the University of Graz and also reaches out across organisational boundaries. Its main areas of interest are empirical and experimental research in finance. (more...)

Upcoming events:
FiRe research seminar (May 19, 2025,9:00-9:45)
FiRe lecture (Mai 20, 2025, 17:00-18:30) 
FiRe research seminar (June 23, 2025, 16:00-17:30)

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New paper on integrating multiple sources of ordinal information in portfolio optimization

In a new paper, recently accepted for publication in Annals of Operations Research, FiRe member Roland Mestel and his co-authors Eranda Cela, Stephan Hafner and Ulrich Pferschy present two different approaches for incorporating multiple qualitative views specified as total orders of the expected asset returns in a mean–variance portfolio optimization model. (1) In the robust optimization approach they first compute a posterior expectation of asset returns for every given total order by an extension of the Black–Litterman (BL) framework. Then these expected asset returns are considered as possible input scenarios for robust optimization variants of the mean–variance portfolio model. (2) In the order aggregation approach rules from social choice theory are used to aggregate the individual total orders into a single “consensus total order”. Then expected asset returns are computed for this “consensus total order” by the extended BL framework. Finally, these expectations are used as an input of the classical mean–variance optimization. Using empirical data the authors empirically compare the success of the two approaches in the context of portfolio performance analysis and observe that aggregating orders by social choice methods mostly outperforms robust optimization based methods.

Link to paper (open access) 

New project funded: Gender and Sex Dynamics in Financial Behavior

A grant application by FiRe members Berivan Gürel and Stefan Palan titled “Gender and Sex Dynamics in Financial Behavior -  Experimental Evidence” has received nearly €300k funding from the OeNB’s Anniversary Fund. The project will generate insights into the interactions between gender/sex on the one hand, and risk perception, risk preferences, and risk-taking on the other hand. Helena Fornwagner (University of Exeter Business School), an Associate of the Austrian Institute of Economic Research (WIFO), Felix Holzmeister (University of Innsbruck) and Julia Rose (Erasmus School of Economics) are the cooperation partners of this project.  FiRe member Berivan Gürel is the heart of the project team, as three of the six planned studies form part of her doctoral thesis.

New paper on the real effects of distressed bank mergers

FiRe member Erik Theissen and Co-authors publish a paper on the real effects of distressed bank mergers. Abstract: We show that distressed bank mergers that are a widely used instrument for bank resolution have the potential to generate adverse real economic effects. We analyze distressed mergers of German savings banks and show that they represent exogenous shocks to the (initially non-distressed) acquiring bank. In the years after a distressed merger: (i) the performance of the acquiring savings bank deteriorates; (ii) the shock is transmitted to firms in the acquirer’s region which cut back their investments and reduce employment and (iii) the overall macroeconomic dynamics in the region of the acquirer deteriorates, leading to reductions in investment and employment growth. To support a causal interpretation of our results we perform several tests that confirm that local economic dynamics is affected by the shock to the acquiring bank and not by real economic contagion.

Link to the paper (open access)

New paper on the role of financial integration for sovereign bond investors’ hedging possibilities 

A paper recently accepted in the Journal of International Money and Finance studies the role of financial integration for bond investors’ hedging possibilities. Platform members Markus Höfler and Andrea Schertler are the first to elaborate the role of financial integration for industrial and precious metals’ hedging and safe haven properties for sovereign bond holdings. They argue that the strength of these properties depends on how much the sovereign bond is globally integrated. Evidence from the sovereign bonds of 24 countries shows that industrial metals provide a stronger hedge and safe haven when sovereigns are more integrated, whereas precious metals do not. The inflation and exchange rates also affect the hedging properties of metals, but bond integration has the strongest economic effect. This evidence helps explain why metals are excellent hedging or safe haven assets for some sovereign bond investors but not for others.

Link to the paper (open access)

New paper on algorithmic trading and mini flash crashes

FiRe members Roland Mestel, Viktoria Steffen and Erik Theissen publish a paper on algorithmic trading and mini flash crashes. Abstract: We use stock-day level data on the market share of algorithmic trading to analyze whether algorithmic trading affects the frequency of mini flash crashes in the Austrian stock market. We use an instrumental variables approach and the Petrin and Train (2010) control function approach to address endogeneity concerns. We find no evidence that algorithmic trading significantly affects the probability of the occurrence of mini flash crashes.

Link to the paper (open access)

New publication on the financial economics of automated market makers. 

FiRe members Alexander Brauneis, Roland Mestel and Martin Rauch publish on the financial economics of automated market makers. With the inception of Bitcoin in 2009 as the world’s first cryptocurrency, a new era of trustless, censorship resistant and decentralized transfer of assets has commenced. Smart contract capable blockchains like Ethereum allow for the creation of computer code which is stored on the blockchain. The code executes tasks in a transparent and immutable way, without central authorities or third party middlemen. Automated market maker (AMM) liquidity pools are a groundbreaking application built on top of smart contract blockchains, first introduced in late 2018. AMMs facilitate the non-custodial exchange of arbitrary assets that can be represented on a blockchain, or tokenized. This chapter sheds light on the operating principles of AMMs and highlights variants of AMMs and notions of liquidity provision, slippage, and impermanent loss.

Link to the publication

New paper on interlocking directorships of Islamic firms

Along with her co-author Amal Alabbad, platform member Andrea Schertler examined the announcement effect of 276 director appointments on the stock price of Islamic firms. Announcing a director's additional appointments may positively reflect the skills and negatively reflect the workload of the director and, therefore, may influence how investors perceive the shareholder value of the director's home firm. Event study tests show that the appointment of directors to other firms in Islamic jurisdictions decreases the home firm's stock price, on average. For appointments to non-Islamic firms, the stock price increases in the appointing firm's relative market capitalization, which brings prestigious benefits to the home firms.

Link to the paper (open access)

New paper on monetary and government policies to fight inflation

Christof Haar, a member of the FiRe platform, examines how monetary and fiscal policy can use their respective toolboxes to fight inflation. By reviewing the academic literature since the 2000s, he examines how such policies work and highlights key points to consider, especially in times of crisis. To fight inflation effectively, central banks and governments should not pursue policies in isolation, but should work together.  Monetary policy affects future tax revenues and the debt-to-GDP ratio by setting interest rates. Expansionary fiscal policies should also include strategies to reduce government spending to avoid high inflation and high debt burdens. During and immediately after crises, both monetary and fiscal policy must be careful to avoid a sharp rise in future inflation. The author also looks at households' and firms' inflation expectations, which can influence economic behaviour and thus future inflation rates.

Link to the paper (open access)

New paper on insider trading regulation

Along with his co-authors Dominik Schmidt and Thomas Stöckl, platform member Stefan Palan examined traders’ regulation preferences conditional on their prospects of becoming informed. Their findings reveal that traders voted against regulation in 64% of referenda. Moreover, traders’ prospects of becoming informed significantly impacted the outcomes of the referenda. Individual votes reveal that traders who know they will remain uninformed support regulation in 69.27% of the cases, while informed traders do so only 8.33% of the time. Traders who may or may not become informed support regulation 33.33% of the time.

For fresh insights into trader behavior and the forces at play pertaining financial market regulation, we encourage you to give it a read!

Link to the paper (open access)

New Paper on Intraday Trading Patterns in global cryptocurrency markets

FiRe’s "crypto-trio" – Alexander Brauneis, Roland Mestel, and Erik Theissen – recently published a paper in the Review of Quantitative Finance and Accounting that looks at the commonalities of intraday trading patterns in the global crypto market. While trading patterns in equity and other financial markets are often determined by institutional features such as exchange trading hours or batch settlement procedures, the absence of these constraints makes cryptocurrency markets an ideal testing ground for an in-depth analysis of whether unique (local) or common (global) determinants cause these intraday trading patterns. The authors compile a large sample of 1940 currency pairs traded on 38 cryptocurrency exchanges across five continents. These exchanges operate 24h a day, seven days a week, and settle trades instantly. Brauneis/Mestel/Theissen find pronounced time-of-day patterns in trading activity, volatility and liquidity. These patterns are remarkably similar across exchanges, time zones and cryptocurrency pairs. In particular, trading activity, volatility and illiquidity peak between 16:00 and 17:00 Coordinated Universal Time (UTC), i.e. during U.K. tea time. Finally, the authors report that characteristics of the exchanges (such as their locations) and the currency pairs traded (e.g. whether two pairs share a common currency) explain some, but not all, of the similarities in intraday patterns.

Link to the paper (open access)

New video about non-standard errors

The team behind a recent Journal of Finance paper has posted a video explaining the concept of non-standard errors. This is a vital piece of research for researchers across all fields, and we highly recommend giving it a watch.

The video provides a succinct explanation of non-standard errors. In contrast to standard errors, which represent the variability in statistical estimates when samples are randomly drawn from a population, non-standard errors occur when different research teams analyzing the same sample make diverse decisions along the analysis path, leading to variability in estimates.

In an experiment involving 164 research teams that platform members Stefan Palan and Andrea Schertler were part of, they demonstrated that non-standard errors are at least as large as standard errors. This highlights the dual sources of uncertainty in any given estimate: standard error (variability with different samples) and non-standard error (variability with different teams analyzing the same data).

Visit https://nonstandarderrors.com/ for further information and the video.

Successful FiRe Lecture with Alexandra Niessen-Ruenzi

 As part of the FiRe Lecture series, Prof. Dr Alexandra Niessen-Ruenzi gave a lecture on June 5th, 2024 on the topic of gender differences in investments. Prof Dr Niessen-Ruenzi highlighted the differences in the capital market participation of women and men based on a comparison between Germany and Austria. She addressed the main causes of this problem and explained that women tend to choose lower-paid professions than men and that there is a wage gap as soon as women enter the labor market. This wage gap widens when women have their first child, which is known as the "child penalty". Even when women return to work, they do not earn as much as they would without children. In addition, women stay away from the capital markets or pursue less risky financial strategies. This puts them at a disadvantage when it comes to building up assets for retirment, especially as women statistically live longer than men.

The relevance of the topic was confirmed by the interest shown by over 100 people of different ages. The participants of the FiRe Lecture listened intently to Prof Niessen-Ruenzi's presentation on gender-specific differences in the capital market. 

The Institute of Banking and Finance would like to thank Prof Niessen-Ruenzi for her insightful lecture, General Director DI Cisar-Leibetseder (Volksbank Steiermark) for her introductory remarks and for sponsoring the event, and the SoWi graduate association and the Finance Club Graz for supporting the event.

Erik Theissen joins Commission of Exchange Experts

Erik Theissen was appointed to the Commission of Exchange Experts of the German Federal Ministry of Finance. This commission advises the Federal Ministry of Finance in questions of capital market policy. Its members include high-ranking representatives of significant German firms such as Siemens AG, DZ Bank AG, Deutsche Post AG, and Deutsche Bundesbank. Erik Theissen will provide his scientific expertise to the commission for the next three years, starting on April 15th, 2024.

Paper on sustainable investments

Together with researchers from Vienna, Stavanger and Brussels, Stefan Palan recently published a paper titled "Can information provision and preference elicitation promote ESG investments? Evidence from a large, incentivized online experiment" in the Journal of Banking and Finance. They study the role that providing information about financial returns and environmental, social, and governance (ESG) impacts plays in influencing investors' decisions towards sustainable investments.

The paper reveals that both financial return information and ESG impact information stimulate investors towards ESG investments. Interestingly, combining these two types of information does not enhance the effect beyond presenting either one alone. This insight is crucial for financial advisors and institutions looking to promote ESG investments among their clients, as it suggests a targeted approach to information provision can be effective.

Link to the paper (open access)

For inquiries, please contact fire.graz@uni-graz.at.