May 19, 2014
from 02:30 PM to 04:30 PM
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The CERF Cavalcade will be an exciting afternoon to showcase the research of recently funded projects supported by the Cambridge Endowment for Research in Finance. The event will take place at the Lucia Windsor Room, Newnham College, Cambridge, Monday 19th May 2014, 2.30-4.30pm. Please contact the CERF Administrator at firstname.lastname@example.org if you would like further information.
The CERF Cavalcade
Lucia Windsor Room, Newnham College Cambridge
Monday 19th May 2014, 2.30-4.30pm
Welcome and Introductions
A word from the CERF Director
Professor Bart Lambrecht
Professor Sanjeev Goyal
Trading in Networks: theory and experiments
Abstract: We propose a model of posted prices in networks. The model maps traditional concepts of market power, competition and double marginalization into networks, allowing for the study of pricing in complex networks of intermediation such as supply chains, transportation and communication networks and decentralized trading work and point to node criticality as an organizing principle for understanding pricing, efficiency and the division of surplus in networked markets.
Bio: Sanjeev Goyal is a pioneer and leading international scholar in the study of social and economic networks. His book, `Connections: an introduction to the economics of networks`, was published in 2007 by Princeton University Press. A Chinese translation appeared in 2010.
Professor Giancarlo Corsetti
The mystery of the Printing Press: Monetary Policy and Self-fulfilling Debt Crises
Abstract: Government default may be driven by either self-fulfilling expectations or weak fundamentals. We propose a theory of monetary backstop to government debt by which the central bank can rule out the former. When the central bank stands ready to intervene in the debt market, it can effectively swap risky government debt for monetary liabilities whose demand is not undermined by fears of default. Although a successful backstop requires no actual purchase of debt, prospective interventions must be credible, i.e., feasible and welfare improving off-equilibrium. Because of risk of fundamental default, a constraint on the central bank remittances to the fiscal authority may undermine the credibility of backing the government's financing needs in full. Investors would anticipate that monetary authorities may want to limit their exposure to sovereign debt, not to be forced to absorb large losses through socially inefficient monetization. A partial backstop strategy can nonetheless be effective --- provided credible interventions are large enough to make the option of default no longer attractive, and the equilibrium unique.
Bio: Giancarlo Corsetti, Professor of Macroeconomics received his Ph.D. from Yale (1992), his contributions range from theoretical and empirical work on fiscal and monetary policy, to analyses of currency and financial crises and their international contagion. Serves as co-editor of the Journal of International Economics, Programme Director at Centre for Economic Policy Research in London, and scientific consultant to the Bank of England and the European Central Bank. Prior to He has taught at Rome, Yale, the European University Institute.
Dr D’Maris Coffman
Early Critiques of Inflation-Targeting: Albert Aftalion’s
Monnaie et Industrie
Abstract: Although Albert Aftalion is primarily remembered as the founding editor of the Revue économique in 1950, his Les crises périodiques de surproduction (1913), written over three decades earlier, is widely remembered as his attempt to introduce Aflred Marshall’s marginalism into France. Judged less narrowly, it represents one of the first structural theories of economic crises. A committed reformist, Aftalion was deeply concerned with the distributional effects of macroeconomic policies and with intermediate levels of analysis. This paper examines his critique, in his 1929 treatise, Monnaie et Industrie: Les grands Problèmes de l'Heure présente, of inflation-targeting and what today we would recognise as ‘central bank monetarism’ and the doctrine of central bank independence. We also relate his 1929 treatise to the structural theory he presents in the 1913 work, thereby highlighting his central preoccupation with liquidity. CERF contributed to the task of issuing the first English translation/edition of Periodic Crises of Overproduction, which is forthcoming in print later this year.
Bio: D'Maris Coffman is a Leverhulme/Newton Trust Early Career Fellow in the History Faculty and an affiliated lecturer there. From October 2008 through September 2013, she was the Mary Bateson Research Fellow at Newnham College of the University of Cambridge. Her first monograph, Excise Taxation and the Origins of the Public Debt, was published October 2013.
Closed End Funds and Limits to Arbitrage in Emerging Markets
Abstract: The vast majority of mutual funds are open-ended. Stein (2005) argued that this fact has contributed to limits to arbitrage displayed by the professional money managers and their resulting inability to prevent stock prices diverging substantially from fundamentals particularly at times of bubbles and crises. This paper examines the differences in the trading behaviour of open versus closed end funds investing in emerging market equities during the 1998 Asian crisis and the 2008 Global Financial crisis. In particular, we seek to establish in accordance with the Stein model whether closed end funds are indeed able to adopt a more contrarian approach to investing in this highly volatile asset class.
Bio: Prior to returning to full-time education in 2001, Dr Chambers worked for 20 years in investment banking at Barings, Hotchkis & Wiley and Merrill Lynch. He gained experience in asset management, mergers and acquisitions and venture capital in Europe, Japan and the United States. Dr Chambers is Director of the Centre for Endowment Asset Management at CJBS, an Associate Director of the Centre for Financial History and a member of the Cambridge Corporate Governance Network (CCGN).
Endowment Investing Over the Very Long Run
Abstract: This paper examines the asset allocation and investment strategies of three leading U.S. educational institutions – the Harvard, Yale and Princeton endowments. Contrary to their leading role in the recent shift to alternative investments, their adoption of common stock investing in the ‘new era’ of the 1920s was not too dissimilar to other endowments. Their asset allocation strategy outperformed a comparable passive buy-and-hold approach and a mean-variance optimised portfolio. Further, the observed asset weights imply long term average expected excess returns of approximately 6.5% for equities and 1.0% for bonds. All three endowments held large, diversified portfolios with a tilt to large-cap and higher yielding stocks. Their equity holdings performed in line with the overall market but they exhibited poor timing ability when purchasing stocks and marginal ability when selling stocks. Interestingly, donors appear to time equity gifts well.
Bio: Justin Foo is a CERF Postdoctoral Fellow at Cambridge Judge Business School. He recently graduated with a PhD in finance from University of Cambridge and work from his thesis has been accepted for publication in the Journal of Financial and Quantitative Analysis.
Department of Sociology
How does local bias evolve?
Abstract: How does local bias spread? Empirical research in behavioural finance and consumer behavior has shown that investors are pre-disposed to investing in companies located close to where they live (see for example, Huberman, 2001). Typically, the literature has attributed the existence of local bias either to rational investor behavior resulting from access to ‘soft’ information, or to emotional investor behavior resulting from a familiarity bias. There has been little investigation into how soft information is produced or how it flows from the firm to individual investors and between individual investors. We examine this phenomenon using unique hand-collected spatial data from an industrial products firm in Germany which placed 40 bond issues averaging €15 million in size with over 10,000 individual investors between 1998 and 2013. We investigate the presence of the local bias effect using spatial measures, and then analyse the evolution of local bias using spatio-temporal models used in epidemiology for modeling the spread of infectious diseases.
(Research Conducted with Raghavendra Rau)
Bio: Robert's professional career spans 30 years advising and investing in small and medium-sized businesses in North America, Europe and Asia. He began his career in the Brand Management Group at Procter & Gamble Canada. He is a member of Trinity Hall, Cambridge.
Questions and Bringing the Cavalcade to a close
Refreshments will be served.