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Frankfurt, 11th November 2004

Prof. Dr. Wolfgang König E-Finace Lab at the Goethe University

Institute for Information Systems

Making finance mobile

Jan MuntermannAlerting Notifications – Benefits for Mobile Investors

Chair of M-Commerce

Goethe University Frankfurt

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• E-Finance Lab at the Goethe University

• Introduction of Mobile Alerting Services

• Empirical Evidence

• Suitable Mobile Information Infrastructures

• Summary & Conclusion

Agenda

E-Finance Lab

-Prof. Dr. Wolfgang König- Chairman of the Board

E-Finance Lab http://www.efinancelab.de

Partners: Leading Corporations of the Financial Service Sector

E-Finance Lab http://www.efinancelab.de

Focused Research Areas 2004

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• E-Finance Lab at the Goethe University

• Introduction of Mobile Alerting Services

• Empirical Evidence

• Suitable Mobile Information Infrastructures

• Summary & Conclusion

Agenda

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Introduction

Mobile Banking in the past

• Mobile Banking/Broking were expected to be one of the „killer applications“ for mobile commerce in the past [Durlacher 1999; Ericsson 2001]

Problems:• Mobile banking solution were mainly reproduction of already

existing web-based applications but with fewer functionality. • Low bandwidth• High communication costs• Low functionality

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Mobile Banking today

Problems solved:• Fast data services (GPRS/UMTS)• Low data transfer costs (e.g. flat rates)• More functionality possible (new devices with better displays

and browser functionality)

New mobile banking applications make use of mobile aspects in

order to diversify from existing web-based solutions and to provide

additional value.

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• E.g. alerting services:– Minimum balances reached

– Deposits made

– Trades executed

• These proactive and “simple” alerting services reduce call center costs up to 70-90 % (25c vs. $2.77 averaged) [JupiterResearch 2004]

• But: Existing Mobile Brokerage services are still in a ‘primitive’ state focusing mainly on cost reduction.

Are there any mobile brokerage application domains providing

addition value (which may generate access to new business

segments)?

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• The German Securities Trading Law, §15 (WpHG) regulates that stock price relevant company news have to be published via so-called ad hoc disclosures immediately, e.g:

[Ad hoc Disclosure published by Mensch & Maschine AG on 2004-06-21 12:23]

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These disclosures cause price reactions on the capital market

Publication date of the Ad hoc

Disclosure: 14:06CDAX Performance Index

N

Price reaction seemingly induced

by disclosure

Mensch & Maschine intraday stock price development 2004-06-21 on Xetra

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Introduction

• Questions:How to prove that mobile alerting services can utilize these price effects?

Can these price effects be proven? What is the respective time frame? How can a suitable mobile notification

infrastructure be designed?

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www.3gea.com

• E-Finance Lab at the Goethe University

• Introduction of Mobile Alerting Services

• Empirical Evidence

• Suitable Mobile Information Infrastructures

• Summary & Conclusion

Agenda

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Price effect analysis

Publication date of an ad hoc disclosure: 12:23

Is this potential reaction only a market trend?

How does the market

perform?

CDAX Performance Index

Abnormal return* AR13:00~1% ri – 0% rCDAX

=1%

Potential price reaction

(cumulated): ~3%

N

* corrected by an average abnormal absolute return in a 2nd step

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Price Effect Significance

Significance for abnormal stock returns (AR>0) following company announcements

t1,2 t3,5 t6,10 t11,15 t16,20

Mean 0.0334 0.0112 0.0063 0.0014 -0.0048

t-Value 5.94*** 2.43*** 0.92 0.22 -0.79

*** indicates significance on the 1% level (213 observations)

Significant abnormal returns can be proven for the first 5 ticks (=price fixings on a minute basis) following the announcement.

A suitable mobile alerting service would have to inform the investor within this timeframe.

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Price Effect Duration(After how many minutes are these price effects completed?)

Time conversion of the first five price fixings (n=213)

minutes

percent

24,3%

35,8%

16,2%

8,1%

3,4%

6,8%

1,4%4,1%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0-5 5-15 15-30 30-45 45-60 60-90 90-120 >120

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• E-Finance Lab at the Goethe University

• Introduction of Mobile Alerting Services

• Empirical Evidence

• Suitable Mobile Information Infrastructures

• Summary & Conclusion

Agenda

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Notification Scenario

1. The investor holds stocks of company XY.

2. Company XY publishes an ad hoc disclosure at 2004-06-20 at 10:23 am.

3. This event causes an alerting notification to be initiated.

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WML(textual)

Notification Infrastructure

Mobile Device

Push Proxy Gateway

Method Proxy Gateway

InvestorNotification System Infrastructure

Portfolio & Limit Management Server

News Feed Server

Service Indication(textual)

Push Initiation

Ad hoc Announcement

Service Indication(binary)

You have 1 new notification

-User-intrusiveness level: high

-Expiration Date: 2004-06-20 10:23am

WSP GETHTTP GET

WML(binary)

Company XY has published an portfolio relevant ad hoc disclosure.

You hold 156 stocks of this company (current total value $15626.54)

<read> disclosure<sell> <buy> stocks

Web Browser

Notification Configuration:

Price Effect > %andEffect Delay > min

or no notification will be sent

1.5

5

HTTP GET

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• E-Finance Lab at the Goethe University

• Introduction of Mobile Alerting Services

• Empirical Evidence

• Suitable Mobile Information Infrastructures

• Summary & Conclusion

Agenda

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Summary & Conclusion

• The existence of significant short-term price effects following company announcements opens a window of opportunity for non-institutional investors.

• Appropriate mobile alerting services can provide benefits for investors AND service providers.

• The push/pull service WAP Push Indication (SI) combines prompt notification delivery and the processing of message meta data (e.g. priority levels).

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Thank you for paying attention!

Prof. Dr. Wolfgang König

koenig@efinancelab.comwww.efinancelab.com

Jan Muntermann

jan@whatismobile.de www.whatismobile.de