The Department of Finance

The Department of Finance is an international department that consists of 30 faculty members in Finance and 5 faculty members in Statistics as well as 8 administrative staff. The Department of Finance researches in all financial issues, including issues related to financial markets, securities pricing, risk management, corporate finance and household finance. At the Department of Finance, we offer highly qualified teaching within an extensive number of both the full-time and the part-time programs available at Copenhagen Business School. Furthermore, the Department runs a successful PhD Program with 24 PhD students of different nationalities currently enrolled. The Department of Finance organizes a number of seminars every semester, please see Upcoming Finance Seminars above for more information.
 

Recent Work by Department Members

A capital structure channel of monetary policy
Benjamin Grosse-Rueschkamp, Sascha Steffen, and Daniel Streitz
Journal of Financial Economics, forthcoming
We study the transmission channels from central banks' quantitative easing programs via the banking sector when central banks start purchasing corporate bonds. The announcement of purchases reduces bond yields of firms whose bonds are eligible for central bank purchases. These firms substitute bank loans with bond debt relaxing banks' lending constraints: constrained banks increase lending to private (and profitable) firms.

Betting against correlation: Testing theories of the low-risk
Clifford S. Asness, Andrea Frazzini; Niels Joachim Gormsen and Lasse Heje Pedersen
Journal of Financial Economics, forthcoming
Two cool new factors separate competing theories: BAC is strong, consistent with leverage constraints; SMAX works too, consistent with lottery demand.

The Cost of Immediacy for Corporate Bonds
Jens Dick-Nielsen and Marco Rossi
Review of Financial Studies, forthcoming
This paper shows that the cost of immediacy for corporate bonds has increased dramatically after the financial crisis. This increase in transaction costs can be linked to anticipated tighter regulation which impacts market makers' desire to hold inventory positions.

Managerial Biases and Debt Contract Design: The Case of Syndicated Loans 
Tim Adam, Valentin Burg, Tobias Scheinert and Daniel Streitz
Management Science, forthcoming
We document that overconfident managers are more likely to issue loans with rate-increasing pricing provisions (PSD) than regular debt, as biased managers may consider this form of debt to be mispriced. Firms appear to benefit less from using PSD ex post if they are managed by overconfident managers rather than rational managers.

What is the Expected Return on a Stock?
Ian Martin and Christian Wagner
Journal of Finance, forthcoming
We derive a formula that expresses the expected return on a stock in terms of the risk-neutral variance of the market and the stock’s excess risk-neutral variance relative to the average stock. These quantities can be computed from index and stock option prices; the formula has no free parameters. Empirically, the formula performs well in and out of sample

Risk Everywhere: Modeling and Managing Volatility
Tim Bollerslev, Benjamin Hood, John Huss and Lasse Heje Pedersen
The Review of Financial Studies, forthcoming
HExp: a new, simple, and powerful volatility model that works everywhere. How valuable is this, and any other risk models, in terms of dollars, not just R2?

Measuring Agency Costs over the Business Cycle
Ramona Westermann
Management Science, forthcoming
This paper investigates the joint effects of manager-shareholder agency conflicts and macroeconomic risk on corporate policies and firm value. I first derive the implications of a structural model of a firm with assets...

Once Bitten, Twice Shy: The Power of Personal Experiences in Risk Taking
Steffen Andersen, Kasper Meisner Nielsen and Tobin Hanspal
Journal of Financial Economics, forthcoming
This paper study whether personal experiences are so powerful that they make individuals actively shy away from risk. Our results demonstrate that experiences gained personally, rather than common shocks, make individuals shy away from risk.

The Liquid Hand-to-Mouth: Evidence from Personal Finance Management Software 
Arna Olafsson and Michaela Pagel
The Review of Financial Studies, forthcoming
This paper provides new evidence on the mechanism behind consumption choices and shows that individuals have a high marginal propensity to consume out of income payments even in the absence of both present and future liquidity constraints.

Efficiently Inefficient Markets for Assets and Asset Management
Nicolae Garleanu and Lasse Heje Pedersen
The Journal of Finance, forthcoming
We consider a model where investors can invest directly or search for an asset manager, information about assets is costly, and managers charge an endogenous fee. The efficiency of asset prices is linked to the efficiency of the asset management market...

Generalized Recovery
Christian Skov Jensen, David Lando, and Lasse Heje Pedersen
Journal of Financial Economics, forthcoming
We characterize when physical probabilities, marginal utilities, and the discount rate can be recovered from observed state prices for several future time periods. We make no assumptions of the probability distribution, thus generalizing the time-homogeneous

Global economic growth and expected returns around the world: The end-of-the-year effect
Stig V. Møller and Jesper Rangvid
Management Science, forthcoming