Research Seminar 2013-2014


Titles, abstracts and documents :

  • June 2014, Monday 16 (11:00 am): Rise of the Fiduciary State: A Survey of Sovereign Wealth Fund Research by Bill Megginson (University of Oklahoma (USA) and King Fahd University (Dhahran, Saudi Arabia)) (N1- 1711)

    Abstract :We survey the literature documenting the rise of sovereign wealth funds (SWFs), which, with assets under management of over $4.5 trillion in early 2014, are a major force in global finance. Research papers have analyzed the evolution of the initial SWFs from stabilization funds to stand-alone wealth management funds; we both survey this research and show that more than 25 countries have launched or proposed new SWFs since January 2008. The most salient and controversial feature of SWFs is that they are state-owned; we survey the existing literature on state ownership and discuss what this predicts about the efficiency and beneficence of government control of SWF assets. We discuss the documented importance of SWF funding sources (oil sales revenues versus excess reserves from export earnings) and survey the normative literature describing how SWFs should allocate funds. We then summarize the empirical literature studying how SWFs actually do allocate funds–across asset classes, geographically, and across industries. We document that most SWF equity investments in publicly traded firms involve cross-border purchases of sizeable minority stakes (median around 20%) in target firms, with a strong preference for investments in the financial sector. Next, we assess empirical studies examining the impact of SWF stock investments on target firm financial and operating performance, and find universal support for a positive announcement period stock price increase of 1-3%. This, however, is significantly lower than the 5% abnormal return documented for stock purchases by comparable privately owned financial investors in recent studies, indicating there exists a “sovereign wealth fund discount.” We conclude by summarizing the lessons of SWF research and pointing out unresolved issues.

  • May 2014, Wednesday 28 (01:30 pm): Interbank Market Liquidity in the Euro Area: Role and Challenges of the Central Bank by Alain Durré (European Central Bank Monetary Policy Strategy Division, Directorate Monetary Policy – Associate Professor of Finance at IÉSEG-School of Management, Lille Catholic University and LEM-CNRS) N1 – room 035 (Finance and EC Joint Seminar)

    Abstract :The market-oriented approach promoted by the European Central Bank in the design of its refinancing operations creates incentives to credit institutions to use actively the interbank market to manage their liquidity needs. In this context, we examine the ability of the overnight segment to guarantee the timely provision of unsecured funds to banks to smoothly absorb their liquidity shocks. This paper specifically focuses on the speed of reversion of transaction costs and available depth to their equilibrium levels in this market for overnight unsecured funds before and during the first phase of the 2007-2014 financial crisis. The reported evidence points to time-varying liquidity adjustments and identifies liquidity, market activity and the institutional setting of the ECB’s refinancing operations as significant determinants of the observed resiliency regimes. Recently, the nature of the financial crisis that emerged on 9 August 2007 has led to significant challenges for the stability of the banking system which forced the ECB to increase its intermediation role impacting in turn market activity. The Seminar will thus also be the occasion to review the key features of the crisis and the responses of the ECB.

  • May 2014, Friday 23 (02:30 pm): Applications in Describing and Controlling Processes by Erwin M Saniga (University of Delaware) (N1- 119)

    Abstract :I present an overview of optimal procedures to estimate mathematical and statistical model parameters in finance, accounting, marketing, medicine and engineering. The procedures are illustrated with emphasis on some papers in mathematical finance and many in optimal economic, statistical or economic-statistical process control applications. I also discuss the similarity between the approaches and finally present some ideas about the future of research and practice in these areas.

  • May 2014, Friday 9 (02:30 pm): The Difficulty in Designing Control Charts with Estimated Parameters by W. H. WOODALL (Virginia Tech, Blacksburg, VA 24061-0439, USA) (N1- 025)

    Abstract :The performance of control charts, such as the Shewhart X control chart, with estimated in-control parameters has been widely discussed in the literature. Previous studies showed, for example, that at least 400/(n-1) Phase I samples, where n > 1 is the sample size, are required so that the X- chart performs on average as if the in-control process parameter values were known. This recommendation was based on the in-control expected average run length (ARL) performance. The reliance on the expected ARL metric, however, neglects the practitioner-to-practitioner variability. This variability occurs due to the different historical data sets practitioners use, which results in varying parameter estimates, control limits, and in-control ARL values. In this presentation, it is shown that taking this additional type of variability into consideration leads to much larger Phase I samples, far beyond what many previous researchers have recommended, in order to have low levels of variation of in-control performance among practitioners. The standard deviation of the ARL (SDARL) metric is used to evaluate performance for various amounts of Phase I data. Surprisingly, we show that for a variety of charts no realistic Phase I sample size is sufficient to have confidence that the attained in-control performance is close to that desired. These results have significant implications on the relationship between process monitoring theory and practice. An alternative approach is presented for designing control charts.

  • May 2014, Tuesday 6 (11:00 am): Automatic algorithm configuration methods and automatic design of metaheuristics by Franco Mascia & Manuel López-Ibáñez (IRIDIA, ULB) (N1- 223)

    Abstract :Automatic algorithm configuration methods have shown that automatically tuning the parameters of optimization algorithms may lead to much better results, while at the same time saving significant effort to the human designer. Moreover, the potential of these methods to handle a large number of numerical, categorical and conditional parameters opens the door to more powerful applications. One of these applications is the automatic design of metaheuristics. In particular, our recent work has shown that it is possible to use an automatic configuration tool, such as irace, to generate hybrid local search algorithms. The design space of the hybrid local search algorithms is given as a grammar, from which particular algorithms may be instantiated. We convert this grammar description to a parameter space, which can be tuned for a particular problem by means of an automatic configuration tool. The resulting system allows a human designer to automatically find the best hybrid local search algorithm for a particular problem among thousands of potential algorithm designs just by implementing a few problem-specific components.

  • April 2014, Thursday 3(09:00 am): Constraint programming: an overview by Pierre SCHAUS (Université Catholique de Louvain) (N1- 220)

    Abstract :In this talk I will introduce constraint programming (strengths and weaknesses). I will explain some details about the internals of a CP Solver and the facilities offered to extend the solver. I will also illustrate that many CP constraints embed well-known ideas and algorithms from OR (flows, assignments, relaxations, etc) for solving optimization problems with CP.

  • March 2014, Tuesday 25 (3:00 pm): Supply Chain Planning: software support and promising fields of future research by Prof. Dr. Herbert Meyr (Universität Hohenheim, Stuttgart) (N1- 130)

    Abstract :The seminar will describe the history of computer support in supply chain planning (SCP). On basis of this, the common structure of today’s commercial SCP software – so-called Advanced Planning systems (APS) as, for example, the SAP Advanced Planner and Optimizer or Oracle Value Chain Planning – will be discussed. Deficiencies of current APS give reason to briefly sketch some promising fields of further scientific research like the design of industry-specific hierarchical planning systems, simultaneous lotsizing and scheduling in consumer goods industries, the transfer of revenue management ideas to manufacturing industries, using advanced demand information for forecasting and for measuring decoupling points or robustness issues of strategic network design.

  • March 2014, Wednesday 5 (11:00 am): Chapter 11 stocks : return and risk by Xavier BREDART (UMH) (N1, Rue Louvrex 14, 4000 Liège, Room 220)

    Abstract :L’objectif de cet article est d’analyser la réaction du marché autour de l’annonce de mise sous processus de réorganisation d’entreprises américaines. A cette fin, une analyse des cours boursiers d’un échantillon de 435 entreprises américaines mises sous processus de réorganisation durant la période 2000-2012 est réalisée. Dans un premier temps, le rendement et le risque de cet échantillon d’entreprises est analysé, notamment au moyen d’un modèle de régression à effets mixtes. Dans un second temps, nous comparons la rentabilité et le risque des entreprises de l’échantillon initial avec ceux d’entreprises « similaires » mais non impactées par ce type d’événement. Les résultats obtenus rapportent des différences significatives concernant les rendement et le risque aussi bien avant et après l’annonce de mise sous processus de réorganisation qu’entre entreprises défaillantes et non défaillantes.

  • March 2014, Friday 21 (1:30 pm): Urban Water Distribution and Performance: An empirical evaluation of technical efficiency and shadow price of quality using frontier methods by P. MANDE (University of Liège)
    (B31 – Salle du Conseil)
  • January 2014, Wednesday 22 (12:30 am): Market-Oriented Social Enterprises: The For-Profit Challenge of Welfare Institutions by Benjamin GIDRON (University of the Negev) (N1, 220)

    Abstract :The paper focuses on the participants’ perspective of social enterprises, particularly those providing employment for a variety of handicapped populations. It argues that when dealing with such populations with the goal of integrating them into society, contrary to present policy and practice, a market orientation of the organizations employing them, provides, under certain circumstances and with certain populations, advantages and opportunities not awarded in nonprofits or public agencies. It bases the argument on two conceptual frameworks: (1) the social model of dealing with disabilities and (2) the strength-based practice in social work. When translated into the realm of work, both of these suggest that handicapped persons have capabilities to contribute to the economy, to society as well as to themselves, provided they are granted appropriate opportunities to do so. A market-oriented social enterprise framework, designed on the basis of the concept of ‘shared value’, can potentially provide such opportunities.
    For more information:

  • December 2013, Friday 13 (1:30 pm): Complex versus binary menus of contracts: What are the welfare gains? by Philippe Gagnepain (PSE) (B31, Séminaire 7)

    Abstract :This study focuses on the contractual relationships between public authorities and operators. The new theory of regulation suggests that, in a situation of asymmetric information, the principal may propose the agent a complex menu of linear contracts in order to maximize social welfare. While this practice is well understood from a theoretical point of view, it is difficult to implement in practice; instead, simple binary menus are frequently used in reality. Recently, Rogerson (2003) and Chu and Sappington (2007) have suggested through a theoretical exercise that simple binary menus capture a substantial share of the gains achievable by the full optimal menu (at least 75%). A first goal of our paper is to challenge these results empirically in the particular case of the local public sector. Our preliminary results are much more pessimistic than those obtained by these authors. As a by-product, we investigate whether the major source of benefit in contract design comes either from better designing cost reimbursement rules or extending contract length. (joint work with Marc Ivaldi and David Martimort)

  • December 2013, Friday 6 (2:00 pm) : Harnessing Big (Text) Data with Natural Language Processing by Prof. A. Itoo (HEC-ULg) (N1, 1715)

    Abstract :The ubiquity of ICT, and especially, the pervasiveness of Social Media networks have resulted in the generation of a massive amount of data. This phenomenon is commonly referred to as Big Data. It is considered to be of such great relevance that the Economist magazine devoted one issue to it, entitled the Data Deluge. According to estimates by IBM, the volume of data by 2020 is expected to be of the order of 3500 exabytes.
    An increasing number of organizations have realized the value that can be extracted from Big Data, and subsequently exploited for corporate activities, such as marketing. In fact, the most successful organizations thrive and achieve their competitive edge based on their ability to leverage upon and monetize huge amounts of data.
    In my presentation, I will start by introducing and defining Big Data, since we often hear the term “Big Data” without having a clear indication of what it stands for. I will also provide statistics from well-known data sources (e.g. Facebook, Twitter) to illustrate the astounding rate of data creation.
    A significant fraction of Big Data is in unstructured format, including text (e.g. Facebook messages, Tweets, customer opinions on blog) , video (e.g. on Youtube) and photos (e.g. Instangram, Flickr). I will focus on text data. I will delve into the fascinating topic of Natural Language Processes (known as Text Analytics in business), which is my area of expertise. I will give an overview of this topic, and illustrate a sentiment analysis application developed in collaboration with Philips Consumer Lifestyle. This application automatically classifies opinions of consumers from blogs, forums (e.g. Amazon reviews) as either positive or negative depending on their polarity.
    Finally, I will discuss more general issues associated with Big Data and Text Analytics, including the emergence of Data Science as a field of study in its own right, and key research questions/issues that are expected to be crucial in research associated with Big Data in the future.
    Big data and analytics have rocketed to the top of the corporate agenda. The most successful companies in the digital age have thrived and achieved their competitive edge based on their ability to leverage and to monetize data.

  • November 2013, Thursday 28 (11:00 am): Model Uncertainty and Exchange Rate Forecasting by Prof. Remco ZWINKELS (Erasmus University Rotterdam) (N1, Rue Louvrex 14, 4000 Liège, Room 220)

    Abstract :In this paper, we propose a theoretical framework where investors focus on only a subset of the economic fundamentals that drive the exchange rate. We show that the fundamentals chosen by investors feed back into the actual equilibrium exchange rate process. Any adjustment in the set of predictors used by investors leads to a change in the relation between the exchange rate and fundamentals. To test the validity of this framework empirically we design a backward elimination model selection rule, with the aim to capture the current set of fundamentals that best predicts the exchange rate. Out-of-sample forecasting tests show that the backward elimination rule significantly beats a random walk for four out of five currencies. Further, the currency forecasts generate economically meaningful investment profits. (joint work with Kouwenberg R., Markiewicz A. and Verhoeks R.)

  • November 2013, Friday 22 (11:00 am) :Euro at Risk: The Impact of Member Countries? Credit Risk on the Stability of the Common Currency by Prof. Thorsten LEHNERT (Luxembourg School of Finance) (N1, Rue Louvrex 14, 4000 Liège, Room 220)

    Abstract :In this paper, we empirically investigate the impact of the credit risk of Eurozone member countries on the stability of the Euro. In practice, in the absence of eurobonds, euro-area credit risk is induced though the credit default swaps of the member countries. The stability of the euro is examined by decomposing dollar-euro exchange rate options into the moments of the risk-neutral distribution. We argue that sovereign capital structure arbitrage ensures that new information on sovereign distress risk affects the currency. In particular, we document that during the sovereign debt crisis changes in the creditworthiness of member countries have significant impact on the stability of the euro. An increase in member countries credit risk results in an increase of volatility of the dollar-euro exchange rate along with soaring tail risk induced through the risk-neutral kurtosis. We find that member countries credit risk is a major determinant of the euro crash risk as measured by the risk-neutral skewness. We propose a new indicator for currency stability by combining the risk-neutral moments into an aggregated risk measure and show that our results are robust to this change in measure. During the sovereign debt crisis, the creditworthiness of countries with vulnerable fiscal positions is typically the main risk-endangering factor of the euro-stability. Interestingly, however, the market perceives Greece not to be systemically relevant. (joint work with Bekkour, L., Rasmouki, F., Wolff, C.)

  • November 2013, Friday 22 (1:30 pm) : Impulsivity and Social Security by Prof. T. Scott Findley (Utah State University) (B31, Séminaire 7)
  • November 2013, Tuesday 19 (12:30): Thinking of Students as Customers: Implications for Teaching and Research in Business Courses
    by Prof. Dwayne Gremler (Bowling Green State University)
    (N1, Rue Louvrex 14, 4000 Liège, Room 220 – Etilux)

    Abstract :Considering the increasing students’ mobility/volatility and the competition in the education sector, it is becoming more difficult and crucial for universities to attract and retain students. In this respect, considering students as customers (or clients) is a step forward in improving the service quality and thus, the competitiveness of universities. In this seminar, Dwayne Gremler will briefly explore the benefits and challenges in higher education when universities consider their students as customers. He will then suggest that, as service providers/business leaders, business professors should model the behavior they seek to propagate in their students. Dr. Gremler, an international expert in services marketing and the co-author of well-known textbook on the same topic, will share his experience in applying concepts from service marketing and management to the context of the university education. In so doing, participants will have concrete tools and ideas to assist them in providing excellent service quality to their students. At the end of the seminar Dr. Gremler will briefly discuss research he has conducted in educational settings that support such a paradigm.

  • November 2013, Friday 15 (1:30 pm): Pricing Internet Traffic: Exclusion, Signalling, and Screening by Prof. Wilfried Sand-Zantman (Toulouse School of Economics) (B31, Séminaire 7)
  • November 2013, Tuesday 12 (11:00 am) : The Resurgence of Cultural Borders in International Finance after the Financial Crisis: Evidence from Eurozone Cross-Border Depositing by Prof. Stefanie KLEIMEIER (Maastricht University) (N1, Rue Louvrex 14, 4000 Liège, Room 1711)

    Abstract :In this paper, we demonstrate that cultural borders in international finance resurge during financial crises. To investigate the role of cultural borders during both tranquil and crises periods, we employ a unique data set that focuses on Eurozone cross-border depositing in a gravity model framework. We demonstrate that cultural distance limits international financial integration more than one would expect from risk-return differences and that this effect is more severe during crisis periods. While cultural borders are difficult to overcome through markets or integration policies, especially in periods of financial instability, they can be reduced by promoting confidence in institutions.

  • November 2013, Friday 8 (09:00-12:00 am) : Intensive Seminar on Reflexive Methodology by Prof. Mats Alvesson (Lunds Universitet) (Place du XX Août, 7-9, 4000 Liège, Salle académique, groundfloor)
  • November 2013, Friday 8 (10:00 am) : Business Analytics and Big Data: The emerging field of Data Science by Joseph B. (Joe) MAZZOLA (Cleveland State University) (N1, Rue Louvrex 14, 4000 Liège, Room 1715)
  • November 2013, Friday 8 (11:00 am) : Anchoring of Loss Aversion? Empirical Evidence from Art Auctions by Prof. Rachel POWNALL (Tilburg University) (N2,Rue Saint Gilles 35, 4000 Liège, Room 0/74)
  • November 2013, Thursday 7 (09:30 am) : Coaching with Doctoral Students and Doctoral Seminar by Francis Bloch, (Ecole Polytechnique, Paris) (room I.48, B31 -HEC-ULg bld du rectorat 7, Sart-Tilman)
  • November 2013, Thursday 7 (10:00 am) : The Social Economy Facing Financialization. Impact Investing as a Symptom of Systemic Transformations by Eve Chiapello (EHESS Paris) (VUB, D2.01)
  • November 2013, Thursday 7 (10:40 am) : Institutional Frameworks, Venture Capital and the Financing of European New Technology-Based Firms by Sophie Manigart (Vlerick) (VUB, D2.01)
  • November 2013, Wednesday 6 (01:30 – 2:30 pm) : What you consider as Optimal Research Environments? by Pr. Giovanni Barone-Adesi (University of Lugano, Swiss Finance Institute) and Pr. Franz C. Palm (Maastricht university) (Room 074, N2 – Rue Saint Gilles, 35, 4000 Liège)
  • November 2013, Wednesday 6 (02:00 – 5:00 pm) : Les Droits de l’Homme en fiscalité by Pascale Pistone (Vienna University) and Philip Baker (London University) (Salle du Conseil, B31(HEC-ULg), bld du rectorat 7,Sart-Tilman)
  • November 2013, Wednesday 6 (03:15 – 5:00 pm) : PhD Research : Scientific Contributions, Positioning and Publication Strategies by Annouk Lievens (Antwerp University) (room 115, N1(HEC-ULg), 14 Rue Louvrex 4000 Liège)
  • October 2013, Thursday 17 (11:00 am) : International Cross-listing and Price Discovery under Trading Concentration in the Domestic Market: Evidence from Japanese Shares by Yoichi OTSUBO (Luxembourg School of Finance) (N1, Rue Louvrex 14, 4000 Liège, Room 220)

    Abstract :This study examines the role for the Tokyo and the New York Stock Exchange in price discovery for Japanese shares. A structural approach is employed to investigate the efficiency and contribution in price discovery separately. We find that the speed of incorporating information into prices is faster in New York than in Tokyo. Three approaches are taken to control the size of information and confirm New York is the efficient side in information assimilation. We also find that the observable liquidity measures such as trade frequency, bid-ask spread, volume per trade and return variance, explain the price discovery efficiency.

  • October 2013, Thursday 16 (11:00 am) : Combining Passenger and Freight Transportation with Public Scheduled Line Services by Prof. dr. Tom Van Woensel (Eindhoven University of Technology) (N1, Rue Louvrex 14, 4000 Liège, Room 015)

    Abstract :The Pickup and Delivery Problem (PDP) with public scheduled line services concerns scheduling a set of vehicles to serve two types of requests (passengers and freight). Part of the freight journey can be carried on scheduled public transportation. We propose an arc-based mixed integer programming formulation which is solved to optimality using CPLEX. Computational results provide a clear understanding of the benefits of combining passenger and freight transportation in current networks.
    It is a joint work with Vaeceslav Slavic and Emrah Demir.

  • October 2013, Thursday 10 (11:00 am) : Valuing derivatives with Monte Carlo by Prof. Jos VAN BOMMEL (Luxembourg School of Finance) (N1, Rue Louvrex 14, 4000 Liège, Room 220)

    Abstract :In this paper we show that most security price jumps occur periodically, and that interest accrues discretely, during overnight trading halts. This significantly complicates pricing derivatives with closed form models, but makes Monte Carlo methods more efficient. We illustrate the effect of overnight jumps and interest accrual with the valuation of short term European and American options, and long term barrier options. To price the latter options we employ a novel way to sample extreme values, after showing that the Brownian Bridge method is biased.

  • October 2013, Wednesday 2 (11:00 am) : Estimation Risk in Option Pricing by Prof. Denis BAMS (Maastricht University) (N1, Rue Louvrex 14, 4000 Liège, Room 220)

    Abstract :We apply a data driven approach to obtain an entire probability distribution of the loss function used to assess option-pricing performance. Our analysis shows that estimation risk originating from parameters uncertainty is important and can be evaluated adopting a generic model free method. We provide a framework allowing for specification test at the cross-sectional level necessary to evaluate alternative option pricing model performances. The approaches for evaluating alternative option pricing model available in the literature typically rely on either absolute value of loss function comparison without statistical testing or time series based tests assuming homogeneity over cross sections. Our approach allows for cross section testing, opposed to time-series testing. This is critical since pricing uncertainty is found to be time varying. Using European S&P 500 index options, the technique developed is empirically applied to an asymmetric GARCH-type option-pricing model. We provide evidence that the loss function distribution depends on sample-specific information and market conditions. In an application of our test, we highlight the crucial importance of specification tests at the cross-sectional level. In particular, by constructing confidence intervals around the point estimates, it is shown that the estimation of the local volatility parameter has both significant statistical and economic value. (Joint work with Blanchard G. and Lehnert T.)

  • September 2013, Friday 20 (10:00 am): A bilevel programming approach for network pricing optimization problems by Martine Labbé (Département d’Informatique, Université Libre de Bruxelles) (N1 – Rue Louvrex 14, Room 1715, 4000 Liège)

    Abstract :Consider a general pricing model involving two levels of decision-making. The upper level (leader) imposes prices on a specified set of goods or services while the lower level (follower) optimizes its own objective function, taking into account the pricing scheme of the leader. This model belongs to the class of bilevel optimization problems where both objective functions are bilinear.
    In this talk, we review this class of hierarchical problems from both theoretical and algorithmic points of view.
    We first briefly introduce a general taxation model. and present some of its properties. Then, we focus on the problem of setting tolls on a specified subset of arcs of a multicommodity transportation network. In this context the leader corresponds to the profit-maximizing owner of the network, and the follower to users traveling between nodes of the network. The users are assigned to shortest paths with respect to a generalized cost equal to the sum of the actual prices for using specific arcs plus routing costs.
    Among others, we present complexity results, identify some polynomial cases and propose mixed integer linear formulations for those pricing problem.