New review paper on the post-earnings-announcement drift


Josef Fink's comprehensive review "A review of the Post-Earnings-Announcement Drift" has been published in the Journal of Behavioral and Experimental Finance. In this paper, Josef summarizes the literature around this most prominent of mispricing phenomena. He concludes that - while there is evidence for a number of different factors - an all-encompassing explanation remains out of sight.

Cover image of the Journal of Behavioral and Experimental Finance

Successful online workshop of the Austrian Working Group on Banking and Finance


The Institute of Banking and Finance and the Institute of Finance organized the 35th workshop of the Austrian Working Group on Banking and Finance (AWG) on November 26 and 27, 2020. Initially scheduled to be held in Graz, the COVID-19 pandemic necessitated an online format. Despite the virtual meeting, the workshop was a great success. A total of 22 scientists from 12 institutions and 4 different countries presented and discussed their research on topics like portfolio optimization and performance, credit risk, central bank policy and market quality, sustainability and behavioral insights. With about 40 participants, the workshop also attracted an audience that was at least as big as many previous workshops that had been held offline.

The organizers wish to thank all participants and invite them to next year's workshop, which is scheduled to be held, in Graz, on November 26 and 27, 2021.

New paper on the effect of option listings on prices of discount certificates


The paper "Listing of classical options and the pricing of discount certificates” by FiRe member Andrea Schertler has been accepted for publication in the Journal of Banking and Finance.

In this paper, Andrea investigates whether new listings of EUREX options affect the prices of discount certificates that are replicated with precisely such a newly listed option. An event study provides a significantly negative average abnormal margin change on the day on which the EUREX option of the replication portfolio is listed. The papers models the abnormal margin changes as a function of hedging cost, unhedgeable risk, and price pressure. Higher hedging costs, higher opportunity costs from unhedgeable risk, and lower intra-EUWAX competition lead to significantly lower abnormal margin changes. The paper interprets the effect of intra-EUWAX competition as a price pressure effect. Economically, rebalancing and opportunity costs from unhedgeable risk are the most important drivers of abnormal margin changes when EUREX options are listed.

New Paper on Portfolio Optimization based on Qualitative Information


Generating accurate estimates of expected asset returns is a mammoth task in portfolio optimization and especially prone to estimation errors, which negatively influence portfolio allocation decisions. While the classical mean-variance approach solves the portfolio optimization as a deterministic problem, the model by Black and Litterman (BL; Black, Litterman, 1991, Black, Litterman, 1992) accounts for uncertainties in the input data and allows the inclusion of statements regarding absolute returns. In this paper platform members Roland Mestel and Ulrich Pferschy, co-authored with Eranda Cela and Stephan Hafner, extend the traditional BL model by allowing qualitative views, in particular ordering information among expected asset returns.

The authors assume investor views to be stochastic and present a new and competitive approach for translating expected asset return rankings into quantitative estimates of expected asset returns for portfolio optimization. The new estimator for the posterior expectation of returns is computed by applying an importance sampling technique. Using data from the EUROSTOXX 50 and the S&P 100, respectively, the authors empirically evaluate the forecast quality of their new approach in comparison to existing, but methodologically different, approaches from the literature and assess the performance of their model in a mean-variance portfolio context. They find that the new approach mostly achieves the highest predictive power, irrespective of the dataset, the assumed level of accuracy of the ordering information, and mostly irrespective of the investor’s confidence in the qualitative view, even though the improvement resulting from their approach is moderate. They observe a similar behaviour in the context of portfolio performance analysis.

 The paper was presented at the FiRe Research Day in December 2019 and has recently been accepted for publication in The Journal of Banking and Finance.

 Çela, E., Hafner, S., Mestel, R., Pferschy, U, (2021). Mean-variance portfolio optimization based on ordinal information, Journal of Banking and Finance, Vol. 122, DOI:

New paper on the momentum effect


FiRe-researcher Erik Theissen, together with Can Yilanci, a PhD student at the University of Mannheim, has recently published a new working paper studying the momentum effect. Risk-adjusted momentum returns are usually estimated by constructing momentum portfolios and then running a full-sample regression of their returns on a set of factors. This approach implicitly assumes constant factor exposure of the momentum portfolio. However, momentum portfolios are characterized by strong turnover and time-varying factor exposure. The paper proposes to estimate the risk exposure at the stock level. The risk-adjusted return of the momentum portfolio in month t then is the actual return minus the weighted average of the expected returns of the component stocks (stock-level risk adjustment). Based on evidence from the universe of CRSP stocks, from sub-periods and size-based sub-samples, from volatility-scaled momentum strategies (Barroso and Santa-Clara, 2015) and from an international sample covering 22 developed countries, Erik and Can conclude that the momentum effect may be much weaker than previously thought.

The paper has received prominent coverage on the webpage Institutional Investor is a leading international business to business publisher, focused primarily on international finance.

Link to the paper:

New event series - FiRe Research Seminar


We are glad to announce that we are inaugurating a new event series, the FiRe Research Seminar. To be held once a month during term time, the seminar will be an online lecture series scheduled on selected Mondays, from 4pm through 5.30pm. After a lecture of 30-45 minutes, we will have at least another 45 minutes for discussion. We are proud to present the lecturers for the winter term 2020/21:

Florian Ederer (Yale School of Management)

Bill Megginson (University of Oklahoma)

Ryan Riordan (Queen's University)

More information on all seminars can be found on the meetings page.

New paper studying the post-earnings-announcement drift


The team of FiRe-researchers Josef Fink, Stefan Palan and Erik Theissen has recently published a new working paper stuying the post-earnings-announcement drift (PEAD). In the first experimental study of this pricing anomaly, the three researchers show that autocorrelation in earnings surprises is not a necessary condition for PEAD. Rather, such autocorrelations strengthens a drift that is also present in its absence. The paper then goes on to document that the drift can be profitably exploited even after accounting for transaction costs, and that greater earnings surprises are connected to greater drift, likely due to investors underreacting to earnings autocorrelation.

Link to the paper:

New working paper studying the disposition effect


Stefan Palan has just published a new working paper studying the disposition effect. Following a seminar presentation at the Université catholique de Louvain in October of last year, Stefan joined the research project of Rudy De Winne and Nhung Luong, who study whether investors whose behavior exhibits the disposition effect choose different order types and different limit prices than investors less prone to the disposition effect. The working paper reports strong evidence supporting this conjecture from a comprehensive analysis of a large dataset of millions of trades by thousands of Belgian retail investors. For the next version of the paper, the authors aim to run experiments to document causal relationships.

Link to the paper:

Jürgen Brandner joins reseach platform


Jürgen Brandner recently joined the research platform as a PhD student under the supervision of Stefan Palan and Erik Theissen. Jürgen will strengthen our team (which includes Josef Fink) studying the post-earnings-announcement drift. In particular, he plans to study the role of announcement timing on the drift and will also delve deeper into the market microstructure of the phenomenon. 

Michael Kueschnig joins research platform


Michael Kueschnig recently joined the research platform after accepting a position as university assistant at the Institute of Banking and Finance under the supervision of Andrea Schertler. Michael studied Economics at the University of Munich and the Vienna University of Economics and Business and is a Certified Financial Risk Manager. He previously worked as a consultant in the financial services industry, where he specialized in risk management.

Michael's research interests include empirical banking, financial risk management and banking regulation. He intends to center his PhD thesis around the systemic and idiosyncratic risk implications of parent and subsidiary company relationships in the financial sector.

New paper stuying liquidity on cryptocurrency markets


The liquidity of cryptocurrency trading platforms has yet to gain significant attention in the academic literature, especially regarding long-term timeframes. The paper “What Drives the Liquidity of Cryptocurrencies? A Long-Term Analysis” by FiRe members Alexander Brauneis, Roland Mestel and Erik Theissen bridges this gap by analyzing the liquidity of four major cryptocurrencies (Bitcoin, Ethereum, Litecoin and Ripple) on four large trading venues (Bitfinex, Bitstamp, Coinbase Pro and Kraken) over a four-year period.

Referring to another of their working papers (“How to Measure the Liquidity of Cryptocurrencies?”) in which the authors run horse races of various low-frequency measures to identify the best liquidity proxy for cryptocurrency research, Alex, Roland, and Erik estimate the Abdi and Ranaldo (2017) spread estimator from hourly transactions data and compare liquidity across cryptocurrencies and exchanges. In order to identify the drivers of cryptocurrency liquidity the authors analyse a broad set of explanatory variables from general financial markets and global cryptocurrency markets as well as variables specific to each exchange-currency pair. The authors find that the volatility of cryptocurrency returns as well as the dollar trading volume and the number of transactions are the most important determinants of liquidity. Surprisingly, general financial market variables have no explanatory power.

The paper was presented at the FiRe Research Day in December 2019 and has recently been accepted for publication in Finance Research Letters.

Brauneis, A., Mestel, R., Theissen, E., Forthcoming. What Drives the Liquidity of Cryptocurrencies? A Long-Term Analysis, Finance Research Letters, DOI: 10.1016/

Annual report 2019


The past year was again a very active one for our research platform. We have have welcomed new members, published a number of articles, and had excellent research days. Consequently, we are proud to present our Annual Report 2019 to all readers.

Read more here!

Strong showing at AWG 2019 workshop


The Austrian Working Group on Banking and Finance held its 34th workshop on November 22 and 23, 2019. For the first time, this workshop took place outside of Austria, albeit in its immediate neighborhood: in Vaduz, Liechtenstein. This long-established working group traditionally brings together members of the community of banking and finance researchers from all over Austria for a workshop in late November of every year.

This year's workshop saw a strong showing of FiRe researchers, with Lisa-Maria Kampl, Stefan Palan and Ines Wöckl attending despite the fact that they had the longest commute. Stefan presented his joint work with Josef Fink and Erik Theissen, titled "Earnings Autocorrelation and the Post-Earnings-Announcement Drift", and Ines presented her joint work with Edwin Fischer and Lisa-Maria Kampl, titled "On the Valuation and Analysis of Risky Debt: A Theoretical Approach Using a Multivariate Extension of the Merton Model".