STURLA LYNGNES FJESME



CV in pdf


Sturla Lyngnes Fjesme is a Professor of Finance at the Oslo Business School and a Professor II at the Kristiania University College. Sturla’s main research interests are in the areas of Corporate Finance, Financial History, and Asset Pricing. Sturla has presented his research at international conferences such as the American Finance Association Annual Conference (AFA) and published in journals such as the Journal of Financial Economics (JFE), the Journal of Financial and Quantitative Analysis (JFQA), the Economic History Review (EHR), the Journal of Corporate Finance (JCF), Business History (BH), and Financial Management (FM). Sturla has also won multiple awards and scholarships such as the annual Carol Johnston Award for Teaching Excellence and the Norwegian Central Bank Investment Management (NBIM) publication bonus.



Initial Public Offering Allocations, Price
Support, and Secondary Investors


JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS



Tying initial public offering (IPO) allocations to after-listing purchases of other IPO shares as a form of price support has generated much theoretical interest and media attention. Price support is price manipulation and can reduce secondary investor return. In the past, obtaining data to investigate price support has proven to be difficult. I document that price support is harming secondary investor return using new data from the Oslo Stock Exchange. I also show that investors who engage in price support are allocated more future oversubscribed allocations, whereas harmed secondary investors significantly reduce their future participation in the secondary market.





Rejected stock exchange applicants


Journal of Financial Economics
With Neal Galpin and Lyndon Moore



We examine listing applications by firms to the London Stock Exchange between 1891 and 1911. The exchange rejected 82 (13.1%) of the 628 applicants to its main board. Accepted applicants were twice as likely to pay dividends (and to pay twice as much) and had longer firm lives than rejected applicants. Rejected applicants were more likely to file for liquidation than successful applicants. These results remain even after we control for the primary benefits of the listing itself: liquidity and future capital inflows. In this era, the London Stock Exchange could screen applicants for listing.





Foreign market portfolio concentration and
performance


Financial Management



Using security holdings of 49,857 foreign investors on the Oslo Stock Exchange (OSE), I test whether concentrated investment strategies in international markets result in excess risk-adjusted returns. I find that investors with higher learning capacity increase returns, while investors with lower learning capacity decrease returns from the portfolio concentration. I measure learning capacity as institutional classification, geographical proximity to Norway, and cultural closeness to Norwegian investors (as based on the Hofstede cultural closeness measures). I conclude, consistent with the information advantage theory, that concentrated investment strategies in foreign markets can be optimal (disastrous) for investors with higher (lower) learning capacity.





THE WORLD CUP IN FOOTBALL AND THE US IPO MARKET


The Journal of Corporate Finance
With Jin Roc Lv and Chander Shekhar



We document that US IPOs that take place during a world cup in football (soccer), compared to IPOs before or after, exhibit 9% lower underpricing and 6% lower price adjustment. IPOs during world cups receive less attention from foreign investors and exhibit significantly higher long-run returns. Our results are robust to excluding the IPO bubble period of 1999 and 2000, including only listings during summer months, controlling for overall market sentiment and market conditions, and to using various matched samples of non-world cup IPOs. Firm characteristics of world cup IPOs are indistinguishable from those of non-world cup IPOs, suggesting that selection is not driving the results. Consistent with prior studies showing that world cups affect market sentiment, we show that this extends to US IPOs, where lower sentiment, driven by foreign investors, leads to reduced investor attention and lower valuations.





STURLA'S teaching





dERIVATIVES



The market for financial derivatives is one of the biggest in the world. The most important derivative securities are forwards, futures, options, and swaps. Derivatives are central instruments for companies when they deal with risk. This subject focuses on how companies and other institutions can reduce risk by using derivatives contracts.



CORPORATE FINANCE



Corporate finance consists of the financial activities related to running a corporation with a focus on maximizing shareholder value. This course in advanced corporate finance looks at current research articles published in top academic journals to identify how companies implement corporate finance activities in practice.



INVESTMENTS



Through this course, students acquire insight into theories, methods, instruments and institutional circumstances relating to modern financial markets. The students acquire important and fundamental knowledge of the valuation of financial instruments. The course focuses on interest rate instruments, shares and derivatives.



RESEARCH



The course aims to prepare students for writing of the final research project in Finance. Students develop the ability to read, understand and assess academic papers. Topics covered include choice under uncertainty, portfolio theory, asset pricing models, assessing firm performance, investment evaluation, corporate financial policy, and agency theory.



FINANCE 101



This course introduces students to finance and provides them with fundamental principles and institutional knowledge to progress in the discipline. Topics include direct financing and security yields, banking and the money market, the bond and equity markets, offshore finance and foreign exchange, the behavior of financial variables, interest rate risk management and derivative securities.



FINANCE 102



The main objective of this subject is to provide an introduction to the theory and practice of finance. The finance function is mainly concerned with the investment and financing decisions of the firm. In the first half of the subject, different aspects of the investment decision are examined. The second half of the subject examines the financing decisions of the firm including instruments of corporate funding, the theory of capital structure and the theory and practice of dividend policy.



British IPO directors, 1891–1911


Business History
With Neal Galpin and Lyndon Moore



Company directors in Victorian Britain have a somewhat dubious reputation. There are claims that directors had little business experience with the directorships obtained mainly via social connections. However, a little experience goes a long way, and boards with experienced directors can place their securities in an initial public offering (IPO) at better prices and can obtain more dispersed ownership than inexperienced boards. We find evidence of network effects – directors attracted investors from firms they had previously floated. These beneficial effects of experience are appreciated by the market experienced directors are more likely to obtain future positions on IPO boards.





Laddering IPO shares


The European Journal of Finance



Regulators, investors, and the financial media argue that underwriters tie Initial Public Offering (IPO) allocations to investor post-listing purchases in the issuer shares. Using unique data from the Oslo Stock Exchange (OSE) I investigate if these tie-in agreements are driven by price stabilization (reducing price falls below the offer price) or laddering (inflating prices above the offer price). I find that both stabilizing and laddering investors are rewarded with increased allocations for their service. However, only laddering investors increase allocations in very oversubscribed future issues. Secondary investors also lose from falling returns following laddering. I conclude that underwriters use both price stabilization and laddering across different IPOs. However, the rewards for cooperating investors and the economic consequences for secondary investors are much greater following laddering.





When do investment banks use IPO price support?


European Financial Management



Practitioners, regulators, and the financial media argue that underwriters tie initial public offering (IPO) allocations to investor post-listing buying of the issuer shares in a process labelled price support. Arguably, this excess demand boosts post-listing returns which underwriters trade quid pro quo with investor stock-trading commission payments. In this paper, I investigate unique data from the Oslo Stock Exchange (OSE) including investor stock-trading commissions, IPO allocations, and post-listing trading. I document that investors who provide high returns to underwriters before IPOs benefit from price support through increased returns in IPOs. I conclude that price support is used when investors share boosted returns with underwriters.





Informed trading by non-financial companies


Applied Economics Letters



It is well documented in the finance literature how share prices go up when companies increase dividend payouts. The long-term trend, however, is that more companies now retain excess cash rather than paying dividends. In this paper, I investigate if companies retain cash to invest on private information in domestic stock markets. I look at 20,620 domestic non-financial companies trading shares on the Oslo Stock Exchange (OSE) over the period 1993 to 2006. I find that companies earn excess risk-adjusted-returns from active trading. I conclude that companies retain at least some cash to take advantage of private information.





An efficient market? Going public
in London, 1891–1911


The Economic History Review
With Neal Galpin and Lyndon Moore



There have been claims that British capital was not well deployed in Victorian Britain. There was, allegedly, a lack of support for new and dynamic companies in comparison to the situation in Germany and the US.We find no evidence to support these claims. The London Stock Exchange welcomed young, old, domestic, and foreign firms. It provided funds to firms in old, existing industries as well as patenting firms in ‘new-tech’ industries at similar costs of capital. If investors did show a preference for older and foreign firms, it was because those firms offered investors better long-run performance. In addition, we show some evidence that investors who worked in the same industry and lived close to the firm going public were allotted more shares in high-quality initial public offerings.





Retail investor experience, asset learning, and portfolio risk-adjusted returns


Finance Research Letters



It is well documented in the finance literature that retail investors (households) underperform on a risk-adjusted basis when trading in securities markets. More recently, however, there is growing evidence that some retail investors increase risk-adjusted returns from security selection (portfolio concentration). I show that these mixed findings are driven by investor trading experience. Using unique portfolio holdings data of all the 620,970 domestic retail investors on the Oslo Stock Exchange (OSE) from 1993 to 2006, I document that inexperienced investors reduce returns from portfolio concentration. However, as investors gain trading experience their ability to turn portfolio concentration into excess returns improves.





Informed investors, screening, and sorting on the London capital market, 1891-1913


Explorations in Economic History
With Leslie Hannah and Lyndon Moore



Thousands of prospectuses offered shares to British investors at the turn of the twentieth century. We find evidence that there were informed investors who participated in the market at this time. Firms that attracted additional investor demand were more likely to be listed on the London Stock Exchange, survive longer, and achieve better long-run equity returns. We find that the exchange screened lower quality firms away from the main board. The lowest quality firms sorted themselves and did not apply to either the London Stock Exchange main or second board.





Measuring market volatility connectedness to media sentiment


North American Journal of Economics and Finance
With Hooman Abdollahi and Espen Sirnes



We examine directional connectedness patterns from news and social media to financial market volatility using textual analysis and high-frequency data. We find that media sentiment induces market volatility, but the magnitude of that connectedness is time-varying. In addition, news and social media sentiment pertinent to one market transmits volatility to other markets. Finally, we find that sentiment transmits sharp shocks to markets during major events. At other times, there are smaller spillover effects, indicating that the directional connectedness from sentiment to markets follows a spiky pattern over time. We conclude that news and social media play an important (but not constant) role in transmitting volatility across financial markets. This insight explains earlier divergent findings in the literature.













Sturla Lyngnes Fjesme

Professor of Finance

Oslo Business School

Oslo Metropolitan University

sturlafjesme.com

sturla.fjesme at oslomet.no