Copenhagen Business School

About: Copenhagen Business School is a education organization based out in Copenhagen, Hovedstaden, Denmark. It is known for research contribution in the topics: Corporate governance & Context (language use). The organization has 2194 authors who have published 9649 publications receiving 341898 citations.

A Century of Evidence on Trend-Following Investing

Abstract: In this article, the authors study the performance of trend-following investing across global markets since 1880, extending the existing evidence by more than 100 years using a novel data set. They find that in each decade since 1880, time-series momentum has delivered positive average returns with low correlations to traditional asset classes. Further, time-series momentum has performed well in 8 out of 10 of the largest crisis periods over the century, defined as the largest drawdowns for a 60/40 stock/bond portfolio. Lastly, the authors find that time-series momentum has performed well across different macro environments, including recessions and booms, war and peace, high- and low-interest-rate regimes, and high- and low-inflation periods.

Option Valuation with Conditional Heteroskedasticity and Non-Normality

Abstract: We provide results for the valuation of European style contingent claims for a large class of specifications of the underlying asset returns. Our valuation results obtain in a discrete time, infinite state-space setup using the no-arbitrage principle and an equivalent martingale measure. Our approach allows for general forms of heteroskedasticity in returns, and valuation results for homoskedastic processes can be obtained as a special case. It also allows for conditional non-normal return innovations, which is critically important because heteroskedasticity alone does not suffice to capture the option smirk. We analyze a class of equivalent martingale measures for which the resulting risk-neutral return dynamics are from the same family of distributions as the physical return dynamics. In this case, our framework nests the valuation results obtained by Duan (1995) and Heston and Nandi (2000) by allowing for a time-varying price of risk and non-normal innovations. We provide extensions of these results to more general equivalent martingale measures and to discrete time stochastic volatility models, and we analyze the relation between our results and those obtained for continuous time models.

Correlation in Corporate Defaults: Contagion or Conditional Independence?

Abstract: We revisit a test for conditional independence in intensity models of default proposed by Das, Duffie, Kapadia, Saita (2007) (DDKS). Based on a sample of US corporate defaults, they reject the conditional independence assumption but also observe that the test is a joint test of the specification of the default intensity of individual firms and the assumption of conditional independence. We show that using a different specification of the default intensity, and using the same test as DDKS, we cannot reject the assumption of conditional independence for default histories recorded by Moody's in the period from 1982 to 2006. We also show, that the test proposed by DDKS is not able to detect all violations of conditional independence. Specifically, the tests will not capture contagion effects which are spread through the explanatory variables ('covariates') used as conditioning variables in the Cox regression and which determine the default intensities of individual firms. We therefore perform different tests to see if firm-specific variables, i.e quick ratios and distance-to-default, are affected by defaults. We find no influence from defaults on Quick ratios, but some influence on distance-to-default. This suggests, that violations of conditional independence do indeed arise from balance sheet effects.

Do Customer Perceptions of Corporate Services Brand Ethicality Improve Brand Equity? Considering the Roles of Brand Heritage, Brand Image, and Recognition Benefits

Abstract: In order to be competitive in an era of ethical consumerism, brands are facing an ever-increasing pressure to integrate ethical values into their identities and to display their ethical commitment at a corporate level. Nevertheless, studies that relate business ethics to corporate brands are either theoretical or have predominantly been developed empirically in goods contexts. This is surprising, because corporate brands are more relevant in services settings, given the nature of services (i.e., intangible, heterogeneous, inseparable and perishable), and the fact that services settings comprise a greater number of customer–brand interactions and touch points than goods contexts. Accordingly, the purpose of this article is to empirically examine the effects of customer perceived ethicality of corporate brands that operate in the services sector. Based on data collected for eight service categories using a panel of 2179 customers, the hypothesized structural model is tested using path analysis. The generalizability theory is applied to test for measurement equivalence between these categories. The results of the hypothesized model show that, in addition to a direct impact, customer perceived ethicality has a positive and indirect impact on brand equity, through the mediators of recognition benefits and brand image. Moreover, brand heritage negatively influences the impact of customer perceived ethicality on brand image. The main implication is that managers need to be aware of the need to reinforce brand image and recognition benefits, as this can facilitate the translation of customer perceived ethicality into brand equity.