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You are here: Home Issues Volume V(2) - December 2016

Volume V(2) - December 2016

In this issue, results of Bachelor and master theses are presented by C. Hartung, L. Hug, N. Kaufung, L. Nüse and A. Waltenrath.

Present-Biased Preferences and the Health-Education Gradient

Corinna Hartung. Summary of MSc Thesis. The positive and persistent relationship between education and health is well- established and observed across different countries, time periods, and health measures. A large body of literature documents that well-educated individuals are prone to live longer and enjoy better health than less educated ones (e.g. Grossman 2006; D. Cutler and Lleras-Muney 2008). This phenomenon is referred to as the health- education gradient stressing the gradual link between both factors (Deaton 2002). The potential pathways explaining this link, however, are still subject of an ongoing debate. Three mutually non-exclusive pathways are proposed in the literature: First, education might improve health (Grossman 2006). Second, health might affect educational attainment (J. Currie and Stabile 2003).

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The Real Effects of Hedge Fund Activism

Leonie Hug. Summary of BSc Thesis. Since the late 1990s hedge fund activism has been a symbol for stronger shareholder rights and active monitoring. Recently, the number of hedge funds, the events of activism and the invested capital have surged substantially (Krishnan et al., 2015). However, hedge fund activism is a divergent topic. Opponents argue that activism increases the financial risk of the target and induces a wealth transfer from other stakeholders to shareholders instead of creating value.

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Spillover effects of financial deregulation on income and income characteristics

Nicolas Kaufung. Summary of Thesis. As the Great Recession started to enfold almost the entire world economy, financial regulation attracted a lot of attention in the media and politics. Till now, there are loud calls for stronger regulation and significant governmental intervention. Yet, in many areas of financial intermediation, there is mixed or only little evidence about the implications of banking regulation on economic outcomes. One important aspect of the general debate concerning the optimal degree of governmental intervention is the assumptive tradeoff between financial stability and banking efficiency. According to this hypothesis, higher concentration in the banking sector leads to less efficiency and therefore hinders economic growth (Besanko and Thakor 1992; Guzman 2000; Boot and Thakor 2000).

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Sovereign debt reduction through privatization: The case of Portugal

Lukas Nüse. Summary of BSc Thesis. As in many other countries, the Portuguese national debt sharply increased following the outbreak of the 2008 financial crisis. Despite accounting for only 71.7 percent of gross domestic product (GDP) in 2008, public debt reached 111.1 percent of GDP by 2011. Interest rates on Portuguese government bonds rose at the same time. From 3.88 percent at the start of 2008, rates on ten-year Portuguese government bonds rose to 9.19 percent by the end of April 2011. On April 7, 2011, the Portuguese government applied for financial assistance from EFSM and EFSF funds, followed subsequently by the International Monetary Fund (IMF). Lenders agreed to provide the Portuguese state with a total of 78 billion euro over the next three years.

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LASSO-Based Forecasting of Financial Time Series on the Basis of News Headlines

Adrian Waltenrath. Summary of MSc Thesis. In this paper, I carry out an interdisciplinary approach which is rather new and has drawn increasing attention recently. Since, theoretically, news articles contain all relevant information affecting stock prices, it is reasonable to use them to predict stock market volatility. All events causing stock price movements should be reflected in a news story and therefore be incorporated in the data. A challenge lies in the processing of news from their textual form to numerical quantities, which can be handled by mathematical methods to detect potential relations.

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