Exploiting a unique identification strategy based on inaccurate news analytics, we document an effect of news analytics on the market independent of the informational content of the news. We show that news analytics speed up the stock price and trading volume response to articles, but reduce liquidity. Inaccurate news analytics lead to small price distortions that are corrected quickly. The market impact of news analytics is greatest for press releases, as news analytics exhibit a particular skill in “seeing through” the positive spin of press releases. Furthermore, we provide evidence that high-frequency traders rely on the information from news analytics for directional trading on company-specific news. Received: May 17, 2018; Editorial decision: June 14, 2019 by Editor: Thierry Foucault.

Konchitchki and Patatoukas Journal of Accounting and Economics 57 (1-2), 76–88, (2014a) show that aggregate accounting earnings growth predicts future nominal gross domestic product (GDP) growth and that professional macro forecasters do not fully incorporate the information contained in aggregate accounting earnings. Based on results from prior literature, which find that accounting earnings reflect bad economic news in a timelier manner than good news, we condition Konchitchki and Patatoukas’s GDP growth forecast model on the sign of earnings changes. We show that negative changes in aggregate earnings predict future GDP growth while positive changes in earnings do not. Furthermore, we show that professional macro forecasters underreact to the information contained in negative changes in aggregate earnings about future GDP growth. Additional tests suggest our findings are a result of conservative accruals in earnings.

We examine state income and reputation incentives to account for the high dividends of privatized firms. Consistent with these agency-cost based incentives, we show strong and robust evidence that the extent of state ownership is positively related to corporate dividends. We distinguish between the empirical importance of these incentives using variation in the rule of law to protect minority shareholders, the fiscal deficit and the political orientation of the state. Our findings show that an incentive to enhance the state's reputation with minority shareholders can account for the high dividends of privatized firms.

Cumulative Prospect Theory (CPT), the leading behavioral account of decisionmaking under uncertainty, avoids the dominance violations implicit in Prospect Theory (PT) by assuming that the probability weight applied to a given outcome depends on its ranking. We devise a simple and direct nonparametric method for measuring the change in relative probability weights resulting from a change in payoff ranks. We find no evidence that these weights are even modestly sensitive to ranks. Conventional calibrations of CPT preferences imply that the percentage change in probability weights should be an order of magnitude larger than we observe. It follows either that probability weighting is not rank‐dependent, or that the weighting function is nearly linear. Nonparametric measurement of the change in relative probability weights resulting from changes in probabilities rules out the second possibility. Additional tests nevertheless indicate that the dominance patterns predicted by PT do not arise. We reconcile these findings by positing a form of complexity aversion that generalizes the well‐known certainty effect.

We examine residential relocation and opting out of the public school system in response to school choice lottery outcomes. We show that rising kindergartners and sixth graders who lose a school choice lottery are 6 percentage points more likely to exit the district or change neighborhood schools (20% to 30% increase) and make up 0.14 to 0.35 standard deviations in average school test scores between lottery assignment and attendance the following year. Using hedonic-based estimates of land prices, we estimate that lottery losers pay a 9% to 11% housing price premium for access to a school with a 1 standard deviation higher mean test score.

We study how culture influences mutual funds around the world. Uncertainty Avoidance (UA), which is related to ambiguity aversion, is negatively associated with flow-performance sensitivity, deviation from the fund benchmark, fund alpha, and the fraction of active management across the 25 countries in our sample. This is true even when controlling for an exhaustive set of fund- and country-level characteristics. We also find that a fund's deviation from its benchmark is not only affected by the UA of its domicile country but also by the UA of its fund family's country of origin. Our results highlight the importance of considering cultural characteristics, and UA in particular, when studying mutual funds across countries.

This paper reports the results of two randomized field experiments, each offering different populations of Chicago youth a supported summer job. The program consistently reduces violent-crime arrests, even after the summer, without improving employment, schooling, or other arrests; if anything, property crime increases over two to three years. Using a new machine learning method, we uncover heterogeneity in employment impacts that standard methods would miss, describe who benefits, and leverage the heterogeneity to explore mechanisms. We conclude that brief youth employment programs can generate important behavioral change, but for different outcomes, youth, and reasons than those most often considered in the literature.

From the inception of money market funds (MMFs), all MMFs reported a fixed $1 NAV (Net Asset Value). In July 2014, the Securities and Exchange Commission (SEC) issued new regulations for MMFs that require Prime institutional MMFs to report floating NAVs. The SEC did not expect a significant impact on the MMF industry from requiring floating NAVs for Prime institutional funds. We find that over 70% of the assets under management in Prime MMFs left Prime funds with over half the Prime funds closing. We find that more than half of the Prime retail MMFs (which are not required to switch to floating NAV) closed with more than 50% of the assets under management exiting these funds. Finally, we find that for every dollar that exited Prime MMFs a dollar was added to Government MMFs. Based on the SEC's economic discussions, these results all represent unexpected consequences.

Technology adoption often requires multiple stages of investment. As new information emerges, agents may abandon a technology that was profitable in expectation. We use a field experiment to vary the payoffs at two stages of investment in a new technology: a tree species that provides on-farm fertilizer benefits. Farmer decisions identify the information about profitability that arrives between the take-up and follow-through stages. Results show that this form of uncertainty increases take-up but lowers average tree survival, decreasing the cost-effectiveness of take-up subsidies. Thus, uncertainty offers another explanation for why even costly technologies may go unused or be abandoned.

Despite regulatory efforts to promote all-to-all trading, the post–Dodd-Frank index credit default swap market remains two-tiered. Transaction costs are higher for dealer-to-client than interdealer trades, but the difference is explained by the higher, largely permanent, price impact of client trades. Most interdealer trades are liquidity motivated and executed via low-cost, low-immediacy trading protocols. Dealer-to-client trades are nonanonymous; they almost always improve upon contemporaneous executable interdealer quotes, and dealers appear to price discriminate based on the perceived price impact of trades. Our results suggest that the market structure is a consequence of the characteristics of client trades: relatively infrequent, large, and differentially informed.