New paper studying aggregation mechanisms for crowd predictions


The term "wisdom of crowds" is well-recognized at least since the publication of James Surowiecki's book with the same title. It refers to the phenomenon that the aggregated estimates of many different individuals often constitute a surprisingly accurate predictor of the unknown quantity or quality to be estimated. In a recent paper by platform researcher Stefan Palan, co-authored with Jürgen Huber and Larissa Senninger from the University of Innsbruck, the authors study which aggregation mechanism performs best. They compare simple means and medians and more complex, market-based mechanisms. They find that the continuous double auction outperforms all other mechanisms in terms of prediction accuracy.

Palan, S., Huber, J., Senninger, L., Forthcoming. Aggregation mechanisms for crowd predictions, Experimental Economics, DOI: 10.1007/s10683-019-09631-0.

Andrea Schertler joins research platform


Andrea Schertler has joined the research platform after she was recently appointed Professor of Finance and Business Analytics at the Department of Banking and Finance, University of Graz. Andrea has previously held positions at Leuphana University and University of Groningen. Her research will deal with empirical banking, especially risk and regulation. Currently, Andrea is working on projects concerned with money laundering and risk governance. We warmly welcome Andrea to our team.

New paper studying risk perception in markets


What do investors perceive as being risky? And if what they perceive as being risky differs from what finance theory suggests constitues risk - does the market eliminate any potential biases from individual risk perceptions? These are the core questions pursued by platform member Stefan Palan in a joint paper with Jürgen Huber and Stefan Zeisberger. Their research was recently published (online first) in the Journal of Banking and Finance. Titled "Does Investor Risk Perception Drive Asset Prices in Markets? Experimental Evidence", the paper finds that investors nearly exclusively focus on an asset's probabilty of yielding negative returns. In other words, risk perception is driven by the probability of losses, while for example the size of the potential losses does not seem to receive investors' attention.

While this result confirms prior research by some of the authors, finance theorists would rely on a market to eliminate any individual biases, yielding efficient prices, which properly reflect more comprehensive risk measures. Yet the paper's most important finding is precisely that this mechanism does not work. The results show that real-money experimental asset market prices fully reflect the individual risk perceptions. Assets with a higher probability of negative returns fetch lower prices in the market and vice versa. This has important implications for markets outside of the lab, for individual investors, and for investment advisors, who should account for this bias.

Huber, J., Palan, S., Zeisberger, S., Forthcoming. Does Investor Risk Perception Drive Asset Prices in Markets? Experimental Evidence, Journal of Banking & Finance 108(105635)., DOI 10.1016/j.jbankfin.2019.105635.

See also:

New paper in Journal of Economic Dynamics and Control


A joint paper of Stefan Palan's with Marcus Giamattei, Jürgen Huber, Johann Graf Lambsdorff and Andreas Nicklisch, titled "Who inflates the bubble? Forecasters and traders in experimental asset markets", has recently been published (online first) in the Journal of Economic Dynamics and Control. It experimentally studies the interaction of traders and analysts and teases apart their respective roles in producing bubble patterns. We find the greatest bubbles in settings where the roles of trader and analyst are clearly separated, with traders trying to maximize their trading profit and analysts being paid for their forecasting accuracy.

Giamattei, M., Huber, J., Lambsdorff, J. G., Nicklisch, A., Palan, S., 2020. Who inflates the bubble? Forecasters and traders in experimental asset markets, Journal of Economic Dynamics and Control 110, DOI: 10.1016/j.jedc.2019.07.004.

Seminar talk by Ryan Riordan


On August 5, 2019, Ryan Riordan (Queen’s University) gave a talk titled "Trading on Long-Term Information". A seminar room full of researchers and practitioners listened to the lecture in which Ryan presented surprising empirical results regarding the interaction between informed and uninformed market participants. The paper was co-authored by Corey Garriott from the Bank of Canada.

Being a successful researcher who has already published in the most important journals in the field of finance, Ryan concluded his talk by giving a bit of advice about how to be successful when publishing a paper. The FiRe platform wishes to thank Ryan for his exciting and insightful talk and for the time he took to sit down with members of our team to discuss their research.

FiRe Lecture with Oliver Spalt


After the successful premiere of the FiRe Lecture in December of last year, this year's lecture was held on June 5 by Oliver Spalt (Tilburg University, University of Mannheim). Titled "Diskriminierung am Finanzmarkt", Oliver talked about such topics as discrimination against minority fund managers and diverse boards. Drawing in the listeners with questions and by exhaustively addressing their queries, the lecturer managed to captivate the audience.

The FiRe platform wishes to thank Oliver for his thought-provoking an engaging talk. We also thank the Finance Club Graz for their help in organizing the event and the Steiermärkische Sparkasse AG for their sponsoring.

FiRe represented at the Financial Planner Forum 2019


The sixth Austrian Financial Planner Forum took place on May 6 and 7 at the Marriott Hotel Vienna. FiRe was represented by two of its platform members. Roland Mestel gave a talk about "The Blockchain and Its Relevance for Financial Markets" while Stefan Palan presented findings titled "The Customer Profile: Getting from Compulsory Exercise to a Win-Win Situation for Customers and Advisors".

The photo shows (from left) Prof. (FH) Mag. Otto Lucius, Prof. Stefan Palan and Prof. Roland Mestel (photo copyright: Fotostudio Huger).

Viktoria Steffen joins research platform


Viktoria Maria Steffen recently joined the research platform as a PhD student under the supervision of Roland Mestel and Erik Theissen. Viktoria is empirically evaluating the impacts of technological and regulatory changes in European market structure (e.g., MiFID). Furthermore, she will be looking into the presence of flash crashes on the Austrian stock market and the introduction of taxes on capital gains as well as the increase of this tax rate on the Austrian stock market. She will compare Austrian results with those for the German market. Her work is part of a larger project, which examines liquidity in the Austrian capital market in depth, funded by the Oesterreichische Nationalbank Anniversary Fund.

Currently, Viktoria is working as University and Project Assistant at the Department of Banking and Finance.

Funding for research into post-earnings-announcement drift


The Austrian Science Fund (FWF) has decided to fund the joint grant application of platform members Stefan Palan and Erik Theissen, titled "Experiments on the post-Earnings-Announcement Drift". In this research proposal, they plan to study the causes and mechanisms behind the phenomenon that stock prices tend to drift upward (downward) over extended periods of time following positive (negative) earnings news. Given the funding now granted, the team will be able to hire a PhD student to conduct experiments to explore several potential explanations for why post-earnings-announcement drift occurs.

Finance Research Graz Data Services


The Institute of Banking and Finance has recently developed the database “Finance Research Graz Data Services“ (FiRe Graz DS). It contains numerous daily measures of market liquidity and market quality for all equities and ETFs continuously traded via Xetra on the Vienna Stock Exchange. Data are currently available for the period November 1999 to February 2018. The measures are calculated from intraday trade and quote data obtained from the Vienna Stock Exchange. Access to FiRe Graz DS is available exclusively for researchers and research purpose (free of charge). For more details, go to the FiRe Data Services website.

Annual Report 2018


The past year was again a very active one for our research platform. We have unveiled a new event format, the FiRe lecture, have welcomed new members, a number of papers have been published, and we have had excellent research days. Consequently, we are proud to present our Annual Report 2018 to all readers.

Read more here!

Robert Merl joins research platform


Robert Merl recently joined the research platform as a PhD student under the supervision of Stefan Palan. Robert is designing experiments studying the effects of insider trading and its regulation on indicators of market quality, like bid-ask spreads, price efficiency and trading volume. His work is part of a larger project, funded by the Oesterreichische Nationalbank Anniversary Fund and undertaken together with the principal investigator Thomas Stöckl (MCI Management Center Innsbruck).

When he is not working on his PhD, Robert is a professional in orienteering, where he competes for Austria in singles and team events.