Dr Héctor Calvo Pardo (University of Southampton
Title: Informative Social Interactions
Written in collaboration with Luc Arrondel (PSE), Chryssi Giannitsarou (U. of Cambridge) and Michael Haliassos (Goethe U. Frankfurt).
Abstract:
We design, field and exploit novel survey data, from a representative sample of the French population in December 2014 and May 2015 to provide insights regarding social interactions and whether they are informative for financial decisions, or they encourage imitation, mindful or mindless. We provide a model where purely informative social interactions influence subjective expectations of future stock market returns and demand for investing in stocks, and find strong support for the presence of informative social interactions. The extent to which the respondent’s financial circle is informed about or participates in stockholding appears to influence perceptions of recent stock returns and, only through them, expectations of future returns. Controlling for subjective expectations, stock market participation and the conditional portfolio share are positively influenced by the extent to which the financial circle is informed about or participating in the stock market. Alongside informative social interactions with the respondent’s financial circle, we also find some evidence of mindless imitation of stock market participation observed in the outer social circle. These findings suggest that informative social interactions are significant and create a social multiplier for financial education and information, even though the potential for mindless imitation is also present.
Date: Thursday 25th January, 13:00 - 14:00
Event Location: Room W4.03, Cambridge Judge Business School
Nobuyuki Hanaki (University of Nice)
Title: An experimental analysis of the effect of Quantitative Easing
Written in collaboration with A. Penalver, E. Akiyama, Y. Funaki.
Abstract:
In this paper we report the results of a repeated experiment in which a central bank buys bonds for cash in a quantitative easing (QE) operation in an otherwise standard asset market setting. The experiment is designed so that bonds have a constant fundamental value which is not affected by QE under rational expectations. By repeating the same experience three times, we investigate whether participants learn that prices should not rise above the fundamental price in the presence of QE (as found in. Penalver et al., 2017). We find that some groups do learn this but most do not, instead becoming more convinced that QE boosts bond prices.
These claims are based on significantly different behaviour of two treatment groups relative to a control group that doesn't have QE.
Date: Thursday 8th February, 13:00 - 14:00
Event Location: Room W4.03, Cambridge Judge Business School
William H. Janeway (On Board of Managers at CERF)
Title: The Digital Revolution and the State
Abstract:
All of the technologies which combined to enable the Digital Revolution were sponsored by the American state: stored program digital computers, silicon processing, software engineering and the internet. Deployment of the enabling infrastructure and exploration of its potential applications, in turn, were accelerated by the IT/Internet/Dotcom Bubble of 1998-2000. Since then, the Digital Revolution has taken on a life of its own. No longer in need of state support, the Digital Revolution now challenges the authority of the state along multiple dimensions. The IT-enabled globalization of markets and automation of work have overwhelmed the capacity of the state to buffer the consequent disruption of employment with destructive political consequences. At the microeconomic level, disruptive digital services like Uber and Airbnb attack existing modes of regulation in both the directly served markets and in the associated labor markets. Across industries, the application of machine learning techniques to the data generated and captured from interactions with customers has created a new mode of monopolization, additional to economies of scale and scope and network externalities, requiring new approaches to anti-trust regulation. Finally, at the most fundamental level of political economy, digital social media is being mobilized to undermine the political processes on which the legitimacy of the state depends.
Date: Thursday 22nd February, 13:00 -14:00
Event Location: Room W4.03, Cambridge Judge Business School
Marco Bonomo (Insper)
Title: Short-Selling Restrictions and Returns: a Natural Experiment.
Wirtten in collaboration with Fernando Barbosa, João De Mello and Lira Mota.
Abstract:
We estimate the causal impact of short-selling restrictions on stock returns. We take advantage of a unique dataset and exploit a source of exogenous variation in loan fees provided by a tax-arbitrage opportunity that existed in Brazil from 1995-2014. The tax-arbitrage opportunity stemmed from the fact that domestic investment funds were exempted from income taxes on dividends received by stocks they borrowed, whereas the original owner would be taxed if she did not lend out the stock. Because we observe all equity loan transactions, including the investor type, we can distinguish between equity lending transactions motivated by tax-arbitrage from those with the purpose of short-selling the stock. Variation in loan fees on tax-motivated transactions are a source of exogenous variation in borrowing fees in short-selling transactions, which allows us to estimate the causal impact of the loan fees on stock prices. We find that increases in stock loan fees have strong impact on stock prices.
Date: Thursday 8th March, 12:45 - 13:45
Event Location: KH107 (Keynes House), Cambridge Judge Business School
Richard G. Sloan (Haas Accounting Gorup)
Title: Short-Sales Constraints and Aftermarket IPO Pricing
Written in collaboration with Panos N. Patatoukas and Annika Yu Wang.
Abstract:
It is well established that initial public offerings (IPOs) tend to experience positive first-day returns followed by abnormally low subsequent returns, especially around the expiration of lockup agreements. Miller’s (1977) overvaluation theory offers a unified explanation of aftermarket IPO pricing based on divergence of investor opinion about fundamental value combined with short-sales constraints. While prior studies are inconclusive with respect to the importance of short-sales constraints in the IPO aftermarket, we find robust evidence consistent with Miller’s theory. Our research design employs detailed data from the securities lending market and ex ante identifies IPOs with high divergence of investor opinion and limited floating stock. We show that these IPOs drive prior evidence of overpricing in the aftermarket, as indicated by positive first-day returns followed by negative lockup returns, and that the supply of lendable shares is severely constrained for these IPOs, thereby limiting short sellers’ effectiveness to arbitrage overpricing.
Date: Thursday 3rd May, 13:00 - 14:00
Event Location: Room W4.03, Cambridge Judge Business School
Kathy Yuan (LSE)
Title: Dynamic Liquidity-Based Security Design
Written in collaboration with Emre Ozdenoren and Shengxing Zhang
Abstract: Abstract Unavailable.
Date: Thursday 17th May, 12:30 - 13:30
Event Location: Room W2.01, Cambridge Judge Business School
Hui Chen (MIT)
Title: The Darkside of Circuit Breakers
Abstract:
Market-wide trading halts, also called circuit breakers, have been proposed and widely adopted as a measure to stabilize the stock market when experiencing large price movements. We develop an intertemporal equilibrium model to examine how circuit breakers impact the market when investors trade to share risk. We show that a downside circuit breaker tends to lower the stock price and increase its volatility, both conditional and realized. Due to this increase in volatility, the circuit breaker's own presence actually raises the likelihood of reaching the triggering price. In addition, the circuit breaker also increases the probability of hitting the triggering price as the stock price approaches it - the so-called ``magnet effect.'' Surprisingly, the volatility amplification effect becomes stronger when the wealth share of the relatively pessimistic agent is small.
Date: Thursday 31st May, 13:00 - 14:00
Event Location: Room W4.03, Cambridge Judge Business School
Luke Stein (Arizona State University)
Title: Angels, Entrepreneurship, and Employment Dynamics: Evidence from Investor Accreditation Rules
Written in collaboration with Lindsey Laura.
Abstract:
This paper examines the effects of a shock to angel finance on entrepreneurial activity and employment. Using public micro data from the U.S. Census, we construct a state-level estimate of the fraction of accredited investors likely affected by Dodd-Frank's elimination of housing wealth in the determination of accreditation status. We demonstrate that a larger reduction in the pool of potential accredited investors negatively affects firm entry and reduces employment levels at small entrants. Employment increases at small and young incumbents as workers are absorbed, and relative wages for the startup sector decline. Angel finance appears to be a complement to organized venture capital and of greater importance in less concentrated and lower startup-capital-intensive industries. Our paper quantifies the impact of angel finance at the margin and offers insight on the geographies and sectors where it matters most.
Date: Thursday 14th June, 13:00- 14:00
Event Location: Room W4.03, Cambridge Judge Business School
Marcella Lucchetta (Università Ca’Foscari Venezia)
About Marcella Lucchetta
Title: Dynamic Bank Capital Regulation in Equilibrium
Written in collaboration with Andrea Gamba and Duglas Gale.
Abstract:
We study optimal bank regulation in an economy with aggregate uncertainty. Bank liabilities are used as “money” and hence earn lower returns than equity. In laissez faire equilibrium, banks maximize market value, trading off the funding advantage of debt against the risk of costly default. The capital structure is not socially optimal because external costs of distress are not internalized by the banks. The constrained efficient allocation is characterized as the solution to a planner’s problem. Efficient regulation is procyclical, but countercyclical relative to laissez faire. We show that simple leverage constraints can get the decentralized economy close to the constrained efficient outcome.
Date: Thursday 11th October, 13:00 - 14:00
Event Location: Room W4.05, Cambridge Judge Business School
Ron Masulis (UNSW Business School)
About Ron Masulis
Title: CEO Option Compensation Can Be a Bad Option: Evidence from Product Market Relationships.
Abstract: Abstract Unavailable.
Date: Thursday 25th October, 13:00 - 14:00
Event Location: Room W4.05, Cambridge Judge Business School
Oğuzhan Karakaş (Cambridge Judge Business School)
About Oğuzhan Karakaş
Title: Competition and Voting Premium
Abstract:
We examine the impact of product market competition on the market value of shareholder voting rights (i.e., voting premium) for the US public firms. Voting premium reflects private benefits consumption and associated managerial inefficiencies. Exploiting exogenous shocks to competition from three quasi-natural experiments, we find that competition decreases the voting premium. Overall, our results suggest that product market competition can help in curbing private benefits of control and managerial slack.
Date: Thursday 8th November, 12:30 - 13:30
Event Location: North 10 Trumpington St (Lower Ground)
Hubert Kempf (Ecole Normale Superieure de Cachan)
Title: Crisis, contagion and containment policies in financial networks : A dynamic approach
Abstract:
We study the dynamics of a connected banking sector where the financial links between banks are explicitly modelled, including the liquidation procedures in the case of the failure of an individual bank. We use network theory so as to study the propagation of a shock within the sector, with an arbitrary number of banks, explicit balance sheets evolving over time, depending on the failing of connected banks This model of banking network allows us to simulate the bankruptcy contagion process and quantify the extent of a banking crisis. It also allows us to assess various forms of prudential policies.
Date: Thursday 22nd November, 12:30 - 13:30
Event Location: Room W4.05, Cambridge Judge Business School