NCCR “FINRISK - Financial Valuation and Risk Management” (2001-2013)

NCCR Director: Prof. Rajna Gibson (2001-2009), Michel Habib (2009-2013)

Home Institution: University of Zurich

Research in the NCCR and major results

The NCCR “Financial Valuation and Risk Management” (FINRISK) was the programme umbrella to position Switzerland as one of the leading centres worldwide in academic finance. To this end, the twelve FINRISK research projects were built upon a team of 170 dedicated senior researchers, postdocs and PhD students from seven research institutions across Switzerland. The NCCR funded research in the following five areas: Asset pricing and portfolio management; Corporate finance; Risk management; Quantitative methods in finance; Banking and regulation. All in all, the core research topics covered by FINRISK aimed at a better understanding of the risks surrounding financial decision-making and their main implications for the economy at large as well as for individual and institutional portfolio formation.

Two examples of research highlights: “Bank CEO Incentives and the Credit Crisis” (2011) investigates whether bank performance during the recent credit crisis is related to CEO incentives before the crisis. It finds some evidence that banks with CEOs whose incentives were better aligned with the interests of shareholders performed worse and no evidence that they performed better. "False discoveries in mutual fund performance: Measuring luck in estimated alphas" (2010) uses a new approach to determine the fraction of truly skilled managers among US domestic equity mutual funds over the 1975-2006 period. It finds that most funds pick stocks well enough to cover their trading costs and other expenses. It also finds a significant proportion of skilled funds prior to 1995, but almost none by 2006, accompanied by a large increase in unskilled fund managers – due both to a large reduction in the proportion of fund managers with stock-picking skills and to a persistent level of expenses that exceed the value generated by these managers.

Overview of NCCR projects and of participating research groups