NEWSLETTER of July 12, 2024

The following content has been added at finexpert:

BCG
M&A INSIGHTS H1 2024: THE RECOVERY CONTINUES
Dealmakers remain cautious amid economic uncertainty, concerns about inflation and monetary policy, and regulatory and geopolitical headwinds. BCG’s M&A Sentiment Index indicates a mixed outlook for dealmaking activity through the remainder of 2024, following a moderately active market in the first six months. The global value of M&A activity for the first half of 2024 was higher than that for the corresponding period last year but below the ten-year average. Factors promoting a positive outlook for M&A include the ongoing push for digitization, the energy transition, and the need to future-proof business models. >more

S&P Global | DIRK - DEUTSCHER INVESTOR RELATIONS VERBAND
WHO OWNS THE GERMAN DAX?
S&P Global Market Intelligence and DIRK - Deutscher Investor Relations Verband e.V. once again analyzed the changes in the shareholder structure of the 40 listed DAX companies over the course of 12 months in their annual study. In particular, the institutional free float of the DAX 40 issuers was analyzed. The changes in the composition of the DAX, in particular the departure of Linde and Fresenius Medical Care and the promotion of Commerzbank AG and Rheinmetall AG to the top 40 of the DAX, had a noticeable impact on the study results. Overall, investments by institutional investors fell to 56.8% of the free float in 2023 (-1.4 percentage points [pp] compared to 2022). Value investors further increased their holdings in the DAX (+1.0pp) and now hold 36.3% of the identified free float, whereas investors with a focus on GARP strategies (GARP = growth at a reasonable price) reduced their exposure by 1.0pp and now hold 5.2% of the free float. >more

Deutsche Bank Research
AUSBLICK AUF DEN DEUTSCHEN WOHNUNGSMARKT 2024/2025: REGULATORISCHE UNSICHERHEIT LÄSST NACH. ERSTE PREISANSTIEGE. PREISFINDUNG WOHL BALD ABGESCHLOSSEN.
The big question on the German housing market is when will the price correction end? The current market situation is unclear. Our fair prices calculated using a present value model indicate that a further price correction may be necessary. However, numerous factors suggest that all price indices will soon rise. At the same time, inflation is high. Probably the most important reason for prices to rise again is the continuing high fundamental shortage of supply. However, there are no shortages either nationwide or in Germany's eleven metropolitan regions as a whole. Regulatory uncertainty, which contributed to investor restraint in 2023, is decreasing and CO2 emissions in 2022 and 2023 fell more sharply than expected. Cost pressure from higher interest rates and regulation has sparked innovation and entrepreneurial spirit. >more

Deutsche Bank Research
THE INDUSTRIAL EVOLUTION CONTINUES
The energy shock of 2022 posed an existential challenge to Germany's export-based and manufacturing-led growth model. Pessimists worried that without cheap energy, Germany would see a structural decline in both its industrial base and its trade surpluses. Optimists argued that the model would adapt to higher energy prices. So where do we stand? >more

(NOT) EVERYBODY'S WORKING FOR THE WEEKEND: A STUDY OF MUTUAL FUND MANAGER EFFORT
Boone Bowles, and Richard B. Evans
2023
We develop a novel measure of effort and revisit the fundamental questions of asset management: how do incentives relate to effort; and how does effort affect performance? Using unique observations of daily work activity, we define mutual fund manager effort as the ratio of weekend work to weekday work. We find that investment advisors with stronger competitive incentives exert more effort on weekends. Focusing on within-advisor variation, we find that more effort follows poor performance, outflows and higher volatility. Regarding future performance, we show that more effort is associated with higher future returns, especially for mutual funds with strong competitive incentives, higher active share, and lower turnover. Finally, we demonstrate a causal link between effort and performance using exogenous variation in effort due to weather conditions. >more

FROM TRANSCRIPTS TO INSIGHTS: UNCOVERING CORPORATE RISKS USING GENERATIVE AI
Alex Kim, Maximilian Muhn, and Valeri V. Nikolaev
2024
We explore the value of generative AI tools, such as ChatGPT, in helping investors uncover dimensions of corporate risk. We develop and validate firm-level measures of risk exposure to political, climate, and AI-related risks. Using the GPT 3.5 model to generate risk summaries and assessments from the context provided by earnings call transcripts, we show that GPT-based measures possess significant information content and outperform the existing risk measures in predicting (abnormal) firm-level volatility and firms’ choices such as investment and innovation. Importantly, information in risk assessments dominates that in risk summaries, establishing the value of general AI knowledge. We also find that generative AI is effective at detecting emerging risks, such as AI risk, which has soared in recent quarters. Our measures perform well both within and outside the GPT’s training window and are priced in equity markets. Taken together, an AI-based approach to risk measurement provides useful insights to users of corporate disclosures at a low cost. >more