GLUCKSMAN FELLOWSHIP PROGRAM STUDENT RESEARCH REPORTS:
Jennifer McCabe, "An Examination of the Predictive
Abilities of Economic Derivative Markets"
Christian Baier, "The Migration of Corporate Finance
from Banks to Capital Markets in Germany"
WILLIAM L. SILBER, EDITOR
February 2004
PREFACE:
The Glucksman Institute for Research in Securities Markets awards fellowships each year to
outstanding second year Stern MBA students to work on independent research projects under a
faculty member’s supervision. Two research projects completed by the Glucksman Fellows of
2003-2004 are included in this special issue of the Finance Department Working Paper Series.
These papers focus on important topics in empirical finance.
Jennifer McCabe, under the supervision of Richard Levich, examines the ability of economic
derivative auction markets to predict three types of monthly macroeconomic data releases: the
ISM Manufacturing Index, Non-farm Payrolls, and Retail Sales. Christian Baier, under the
direction of Ingo Walter, studies the evolution of corporate fund-raising in Germany from a
relationship-based approach to a capital-markets approach. These papers, reflecting the research
effort of two outstanding Stern MBA students, are summarized in more detail in the Table of
Contents on the next page.
ABSTRACTS:
"An Examination of the Predictive Abilities of Economic Derivative
Markets"
This paper examines the ability of economic derivative auction markets to predict three
types of monthly macroeconomic data releases: the ISM Manufacturing Index, Non-farm
Payrolls, and Retail Sales. An analysis of data from 56 auctions indicates that the markets in
question do not generate more accurate predictions on an absolute basis than consensus estimates
by economists, nor do they provide an indication of the direction of the surprise component of
impending data releases. However, there is some indication that the markets produce predictions
which, on average, contain less of an upward bias than consensus estimates. In addition, the
analysis finds mixed evidence regarding the improvement of the auction predictions since their
inception. In particular, predictions of Retail Sales announcements have improved in accuracy
over time, while predictions of the ISM index and Non-farm Payrolls have not.
"The Migration of Corporate Finance
from Banks to Capital Markets in Germany"
This paper examines the evolution of corporate fund-raising in Germany from a relationshipbased
approach to a capital markets approach. Although this migration has taken place in most
continental European countries the analysis focuses on Germany because of its extensive
historical reliance on bank-based financing. The paper provides quantitative evidence showing
that the transformation process is accelerating and that new groups of intermediaries are
penetrating the German capital markets. Evidence is also provided that these developments will
trigger changes in German corporate governance from the bank-based model to a market-driven
model of corporate control.
