Thu 22 May 13:00: Identifying and exploiting alpha in linear asset pricing models with many potential risk factors
We consider a decomposition of the risk premia of traded factors as the sum of factor means and a parameter vector we denote by phi, which we identify from the cross-section regression of alpha on the vector of factor loadings, betas. If phi is non-zero, then alpha must also be non-zero and one can construct ”phi-portfolios” which exploit the systematic components of non-zero alpha. We show that for known values of betas and when phi is non-zero, there exist phi-portfolios that dominate mean-variance portfolios. The paper then proposes a two-step bias corrected estimator of phi and derives its asymptotic distribution allowing for idiosyncratic pricing errors, weak missing factors, and weak error cross-sectional dependence. Small sample results from extensive Monte Carlo experiments show that the proposed estimator has the correct size with good power properties. The paper then provides an empirical application to a large number of U.S. securities with risk factors selected from a large number of potential risk factors according to their strength and constructs phi-portfolios and compares their Sharpe ratios to mean variance and S&P portfolios.
- Speaker: Mohammad Hashem Pesaran (UCS)
- Thursday 22 May 2025, 13:00-14:00
- Venue: W4.05.
- Series: CERF and CF Events; organiser: Cerf Admin.
Thu 19 Jun 13:00: Aggregation and Convexity in the Provision of Dynamic Incentives
In this paper I identify an alternative preference structure that preserves most of the cherished simplicity of the formulation of the Principal-Agent problem pioneered by Holmstr¨om and Milgrom (1987). The main advantage of my approach is in relation to the structure of the optimal contract: it adds a convex component to their optimal linear contract. This provides new opportunities to revisit empirical predictions and studies based o↵ of their linear formulation and to demonstrate how the empirical irregularities may be at least partially explained by this one additional component identified here.
- Speaker: Thomas Hemmer (Rice Business School)
- Thursday 19 June 2025, 13:00-14:00
- Venue: W2.01, CJBS.
- Series: CERF and CF Events; organiser: Cerf Admin.
Thu 22 May 13:00: Identifying and exploiting alpha in linear asset pricing models with many potential risk factors
Abstract not available
- Speaker: Mohammad Hashem Pesaran (UCS)
- Thursday 22 May 2025, 13:00-14:00
- Venue: W4.05.
- Series: CERF and CF Events; organiser: Cerf Admin.
Thu 08 May 13:00: Farmland as an Asset Class: Investors, Returns and Real Effects
Farmland as an asset class is increasingly popular. We show that U.S. agricultural real estate prices have grown significantly faster than residential real estate prices over the last 130 years, but their growth exhibits less cross-sectional dispersion than residential real estate price growth. These results hold in multiple datasets and time sub-periods. Then, we study the California boom in tree nuts that began during the mid-2010s drought. We show that over-investment depleted groundwater. Large investors with little ex-ante exposure to nuts drive the boom. These new nut investors account for one-fifth of all agricultural well drilling in California over 2013-2023, and nut farms overall account for half of agricultural well drilling. The market as a whole overestimates the persistence of the boom, and large new nut investors are more prone to overreact to this optimism because they can expand nut supply more elastically. Overall, these findings point to significant environmental impacts of investment booms, amplified by large, optimistic newcomers.
- Speaker: Pedro Gete (IE University)
- Thursday 08 May 2025, 13:00-14:00
- Venue: W2.01, CJBS.
- Series: CERF and CF Events; organiser: Cerf Admin.
Thu 05 Jun 12:30: Title to be confirmed
Abstract not available
- Speaker: Murillo Campello (Cornell University)
- Thursday 05 June 2025, 12:30-13:30
- Venue: TBD.
- Series: CERF and CF Events; organiser: Cerf Admin.
Thu 22 May 13:00: Title to be confirmed
Abstract not available
- Speaker: Mohammad Hashem Pesaran (UCS)
- Thursday 22 May 2025, 13:00-14:00
- Venue: W4.05.
- Series: CERF and CF Events; organiser: Cerf Admin.
Thu 08 May 13:00: Title to be confirmed
Abstract not available
- Speaker: Pedro Gete (IE University)
- Thursday 08 May 2025, 13:00-14:00
- Venue: W2.01, CJBS.
- Series: CERF and CF Events; organiser: Cerf Admin.
Thu 19 Jun 13:00: To Be Confirmed
To Be Confirmed
- Speaker: Thomas Hemmer (Rice Business School)
- Thursday 19 June 2025, 13:00-14:00
- Venue: W2.01, CJBS.
- Series: CERF and CF Events; organiser: Cerf Admin.
Thu 13 Feb 12:30: Cryptocurrency ownership
We report results from a large-scale survey of American households to better understand the nature and drivers of cryptocurrency ownership. The sample includes 1,774 individuals on which data is gathered by the Survey Research Center at the Institute for Social Research, University of Michigan. We obtain data on crypto ownership and ownership intent alongside a comprehensive suite of attributes. Crypto ownership is related to several variables including demographics, psychological traits and attitudes measured through psychometric tests, literacy, gambling preferences, financial participation and decision-making, political views, and other potential enablers such as regulations, trust, more widespread usage including by different institutions. We discuss the implications for crypto regulation and policy.
- Speaker: Manju Puri (Duke)
- Thursday 13 February 2025, 12:30-13:30
- Venue: W2.02, CJBS.
- Series: CERF and CF Events; organiser: Cerf Admin.
Thu 27 Feb 12:30: Strategic competition and donor interests: An econometric approach to the market for the allocation of climate development aid for renewable energy projects
The transition to decarbonised economies is essential for economic development in developing economies and it opens venues for developed countries to think strategically about energy and foreign policy in a changing geopolitical context in which energy security and climate targets need to go hand in hand. Analysing how bilateral aid for renewable energy projects is allocated is crucial to understand if donor countries prioritize social and environmental goals or if their motives are less altruistic and focused on their own economic and strategic benefits in the context of the geopolitics of the energy transition and therefore, if they favour targeted development. To examine how official development aid for renewable energy projects (RE ODA ) is allocated across countries we pay attention to donor and recipient characteristics and interactions but also to donor-donor strategic relationships. We use an estimation strategy that combines quantitative social network analysis and panel data models (pplmhdfe, Heckman selection and an IV strategy) to examine the technical, economic or geopolitical motives determining the allocation of bilateral aid for projects on non-emitting energy sources from 2009 to 2018 with OECD -CRS data. Using the degree centrality of the recipient, the Herfindahl index and the market share of the donors’ RE ODA on the recipients to measure the concentration of RE ODA and, therefore, the importance of a donor within the recipient’s network, we analyse the motivations behind the strategic donations of countries. We find that both political and strategic trade interests connected to the access to critical minerals, energy resources and policy drivers are factors affecting the targeted provision of ODA for low-and-middle income countries while, generally, recipients’ needs are not relevant factors driving the reception of RE ODA .
- Speaker: Cristina Penasco Paton (Banque de France)
- Thursday 27 February 2025, 12:30-13:30
- Venue: W2.02, CJBS.
- Series: CERF and CF Events; organiser: Cerf Admin.
Thu 13 Mar 13:00: Measuring the Informativeness of Audit Reports: A Machine Learning Approach
This paper studies the informational value of audit reports using computational linguistic tools based on FinBERT, a cutting-edge large language model (LLM) designed for financial texts. We analyze the topics within audit reports and classify them into 41 labels, organized into standard and expanded components. The standard components contain boilerplate language on audit scope, opinion, and basis for opinion. In contrast, the expanded components contain explanatory language, audit matters, and discussions of audit procedures that reflect auditor judgment. Contrary to the perception that audit reports lack informational value, we find that changes from the addition of new sentences in the expanded components carry strong implications for the client firms’ future performance and misstatement risk. Firms with larger changes in the expanded components exhibit poorer future returns, less persistent operating performance, and a higher likelihood of future financial restatements. These changes trigger investor trading, reducing bid-ask spreads around the audit report releases. Both regulatory influences and litigation pressures drive these changes, underscoring the role of both public and private oversight in enhancing audit report informativeness.
- Speaker: Reining Petacchi (Georgetown)
- Thursday 13 March 2025, 13:00-14:00
- Venue: Castle Teaching Room, CJBS.
- Series: CERF and CF Events; organiser: Cerf Admin.
Thu 13 Feb 12:30: Title to be confirmed
Abstract not available
- Speaker: Manju Puri (Duke)
- Thursday 13 February 2025, 12:30-13:30
- Venue: W2.02, CJBS.
- Series: CERF and CF Events; organiser: Cerf Admin.
Thu 30 Jan 12:30: Strategic Disclosure with Fake and Real News
We develop a model in which information about a rm’s value can be obtained from two sources: (i) voluntary disclosure by a rm’s manager, if she is informed, and (ii) an exogenous source – news – with uncertain accuracy, i.e., who may be real or fake. We focus on the case where the accuracy of the news is positively correlated with the manager’s information endowment, and the manager makes the disclosure decision without knowing the news. In contrast to the existing theoretical literature, our model does not admit a pure-strategy disclosure equilibrium. Instead, the equilibrium is characterized by two thresholds: an informed manager never discloses values below the lower threshold, always discloses values above the higher threshold, and employs a mixed strategy with a monotonically increasing probability of disclosure for values between the two thresholds. We show that the presence of news crowds out managerial disclosure.
- Speaker: Ilan Guttman (NYU Stern0
- Thursday 30 January 2025, 12:30-13:30
- Venue: W2.01, CJBS.
- Series: CERF and CF Events; organiser: Cerf Admin.