Department of International Finance Master Theses FSS 2013

1. Department of International FinanceMaster Theses FSS 2013 Alexander Hillert / Lena Jaroszek (ZEW) / Stefan Ruenzi / Nic Schaub / Paris Tsotsonos / Florian Weigert University of Mannheim http://intfin.bwl.uni-mannheim.de lsruenzi@bwl.uni-mannheim.de Tel: +49 (621) 181-1646

2. Requirementsto Write a Thesis • Youare a studenteitherenrolled in a diplomadegreeormasterprogramatthe University of Mannheim • Youhavesuccessfullycompleted a seminaratoneofthefinancechairs (Prof. Albrecht, Prof. Bühler, Prof. Maug, Prof. Ruenzi, Prof. Theissen, Prof. Terberger, Prof. Weber) • Youareinterestedtowriteyourthesis in thefieldofEmpirical Finance (Asset Pricing, Mutual Funds & Portfolio Management, Corporate Finance,…) • Youareavailable in the time periodfrom March 22 toJuly 22, 2013 • The numberofthesesis limited (8 topics)

3. Schedule • 06.03.2013 Presentationof Topics • 11.03. – 13.03.2013 Registration Period: SubmityourPriority List (via https://formular.io/ls_cf/aaees/ • 18.03.2013 Assignmentof Topics • 18.03. – 22.03.2013 Registration of Master Thesis • 22.03.2013 Start of Thesis Processing Time • Mid May First Colloquium • End June Second Colloquium • 22.07.2013 Submission Deadline of Thesis

4. Colloquia • There will betwo block-seminarsduringthe 7th and 13th weekoftheprocessing time • First Colloquium: Presentationofthesisoutlineanddiscussionoffirst (empirical) results • Second Colloquium: Presentationof (empirical) resultsanddiscussionof final thesisstructure • Colloquiaserveas additional guidancetosuccessfullystructureyourthesisandtostimulatefurtherresearchinvestigations; Colloquiaare not graded • Participation on both block-seminarsismandatoryfor all students

5. Further Information • Supervision ofthesisbyassignedadvisorand Prof. Stefan Ruenzi • Language: German or English • Page Limit: approx. 50 pages (withoutappendix) • Formal Requirements: Master Thesis is an independentacademicresearchpaper (followtheguide „Leitfaden zur Anfertigung von Diplom- und Seminararbeiten“ ofProfessor‘s Weber chair) • Wesupportempiricalworkandhelptoretrieverequireddata • „Noexcusespolicy“ forplagiarism

6. Diplomarbeit Topics: Master Theses FSS 2013

7. Topic R1: How to (robustly) measure financial literacy • Advisor: Lena Jaroszek (ZEW, jaroszek@zew.de) • Literature review and empirical topic • Motivation: Private investors face financial decisions regarding their everyday life but also old age provision. Studies evaluateprivate investors’ financial literacy and analyze whether superior financial knowledge is associated with more favorable financial outcomes. For this purpose financial literacy is typically assessed via quiz questions in household surveys. • The aim of the master thesis is: • To conduct a literature research on approaches to approximate financial literacy, including proxies like general schooling or numerical skills but also different measures constructed from quiz questions in consumer surveys. • To take measures from the literature to the SAVE 2009 household data and compare them with respect to the robustness of the results depending on the different measures employed.

8. Topic R2: An empirical evaluation of a textual analysis based investor sentiment index • Advisor: Alexander Hillert (hillert@bwl.uni-mannheim.de) • Empirical topic • Idea: construct an investor sentiment index based on qualitative information and compare its explanatory power to the standard quantitative sentiment indices (e.g. Baker/Wurgler (2006)). • Major tasks for the linguistic part: download press articles (LexisNexis, Factiva), adapt existing word lists (cf. Tetlock (2007), Loughran/McDonald (2011)) to the text corpus, process texts with software (LIWC or Antconc) to get the sentiment of each article, aggregate sentiment into an index. • Major tasks for the empirical part: analyze correlation with other indices and macro-economic factors; test whether news-based sentiment explains return differences between sentiment-prone and not sentiment-prone stocks; analyze whether news-based sentiment explains the profitability of return anomalies • Remarks: knowledge about textual analysis is required for this topic

9. Topic R3: Predicting bankruptcy – A textual analysis approach • Advisor: Alexander Hillert (hillert@bwl.uni-mannheim.de) • Empirical topic • Idea: use qualitative information to predict corporate bankruptcyPrior studies only use quantitative information (stock market and accounting data) to predict bankruptcy  does qualitative information add value? • Two data sources for qualitative information: press articles (LexisNexis, Factiva) and corporate reports (8-K, 10-K, and 10-Q filings) • Major tasks for the linguistic part: download text corpora, adapt existing word lists (cf. Tetlock (2007), Loughran/McDonald (2011)), process texts with software (LIWC or Antconc) to compute a negativity/insolvency score. • Major tasks for the empirical part: test whether the text-based measure predicts bankruptcy, replicate the model of Campbell et al. (2008), test whether the text-based measure improve the model. • Remarks: knowledge about textual analysis is required for this topic

10. Topic R4: Does Public Opinion Affect Executive Pay? • Advisor: Paris Tsotsonos (tsotsonos@bwl.uni-mannheim.de) • Empirical topic • Recent literature has shown that public opinion can be a disciplining device for various corporate decisions, e.g. in the context of corporate governance • In the context of executive compensation, Bebchuk et al. (2002) and Bebchuk/Fried (2004) argue that public outrage may limit CEO pay • Research idea: investigate whether public opinion affects the level and the structure of executive pay in the US • Benchmark paper: Kuhnen, Niessen (Management Science, 2012) • The empirical study involves a textual analysis of news articles (programs will be provided by the chair)

11. Topic R7: Linking Fund Flows, Market Liquidity and Asset Prices • Advisor: Michael Ungeheuer (ungeheuer@bwl.uni-mannheim.de) • Empirical and/or theoretical topic • Motivation: Illiquidity tends to suddenly jump to high levels, simultaneously with price drops and across many securities (e.g. Black Monday 1987). This characteristic can be a large risk for investors (and economies). • Research Question: What is the nature of the link between the behavior of funds and extreme liquidity crises? • Tasks for this thesis: • Review and classify the existing theories about destabilizing mechanisms linking the behavior of funds and market liquidity during crises. • Conduct an empirical study: Test the relationship between fund flows (and/or other fund-related variables), stock liquidity and asset prices.

12. Topic R8: Downside Liquidity Risk • Advisor: Michael Ungeheuer (ungeheuer@bwl.uni-mannheim.de) • Empirical topic • Motivation: There is evidence for a downside liquidity risk premium. It is however not clear how to optimally measure (downside) dependence between liquidity shocks and returns. • Some alternative measures of dependence: • Pearson correlation • Spearman (‘rank’) correlation • Conditional versions of these correlation coefficients • Tail dependence • Research Question: Considering a wide range of measures of (downside) dependence, what are good measures of dependence between liquidity and returns? How are they related to expected returns? • Tasks for this thesis: • Analyze the structure of dependence between stock liquidity shocks / returns and market liquidity shocks / returns. • Link the structure of dependence to expected returns.

13. Final Remarks • Pleasereadthedocumentfortheassignmentofdiploma- andmastertheses on ourwebpage (http://intfin.bwl.uni-mannheim.de) andpayattentionto all deadlines • Assignmentoftopicsisbased on your grade obtained in theseminar • Pleaseonlyindicatethetopics on theprioritylist, thatyouarereallywillingtowork on • Werewardthewillingnesstoworkempirically in ourgrading • Questions: weigert@bwl.uni-mannheim.de