Regulatory uncertainty: How it endangers investor strategies!

Regulatory uncertainty: How it endangers investor strategies!

Sudden changes in political, economic and technological conditions can lead to international uncertainty. A striking example is the threat of massive tariff increases by former US President Donald Trump, which led to global concern and uncertainty. In this context, the German Research Foundation (DFG) has approved a new research group that will focus on the effects of regulatory uncertainty on the valuation of assets and investment decisions. This group is entitled “Asset Allocation and Asset Pricing in Regulated Markets and Institutions” and is coordinated by the University of Ulm and has a budget of around 3.2 million euros for a period of four years uni-paderborn.de reported.

In total, the research group consists of seven scientists from six universities, including Professor Dr. Dr. h.c. Caren Sureth-Sloane from the University of Paderborn, who is involved in two of the five sub-projects. The group also includes experts from the faculties of economics, mathematics, finance, insurance, taxes and econometrics, including Professor Dr. Monika Gehde-Trapp from the University of Tübingen. The group's spokesperson is Professor An Chen from Ulm University. The insights gained should contribute to a better understanding of the effects of uncertainty on the financial markets.

Focus on regulatory uncertainties

The research focuses on three key areas:

• Finanzmarkt, Versicherungswirtschaft und Handel
• Klimapolitik, wie beispielsweise CO2-Steuer und Emissionshandel
• Steuersystem

One of the main objectives is to understand how regulatory unpredictability affects the valuation of assets such as stocks, bonds and financial products and changes their attractiveness to investors. Regulatory uncertainty is defined as a lack of clarity regarding the timing and scope of planned economic policy measures such as tariffs or taxes, which can lead to systemic risks in times of political turmoil. The tariff dispute between the USA and the EU, although temporarily resolved, shows that such uncertainties continue to exist in the financial markets kit.edu turns out.

A special sub-project examines “asset allocation”, i.e. the strategic distribution of capital across different asset classes to optimize risk and return. It is crucial that investors adapt their strategies as regulatory conditions change. Mathematical models are being developed that enable these uncertainties to be taken into account in financial decisions. This also includes the development of appropriate mathematical solution methods and algorithms for optimal strategies under uncertainty.

Innovative methods for measuring uncertainty

Another sub-project deals with the investigation of the effects of tax uncertainty on price formation on the capital markets. The aim is to develop an innovative measure of investors' tax expectations that analyzes the effects of tax uncertainty on corporate decisions and the overall economy. These projects combine new methods for measuring and analyzing regulatory uncertainties. Scientific tools such as stochastic optimization as well as methods of “statistical learning” and the analysis of unstructured data are used, as in uni-tuebingen.de is explained.

In summary, the research group deals with a highly topical and indispensable topic that is important not only for science, but also for practice in a financial environment characterized by uncertainty. The findings could provide important input for investors and policy makers alike.