A Fast Literature Search Engine based on top-quality journals, by Dr. Mingze Gao.
- Topic classification is ongoing.
- Please kindly let me know [mingze.gao@mq.edu.au] in case of any errors.
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Results 485 resources
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A key question in the literature on motivated reasoning and self-deception is how motivated beliefs are sustained in the presence of feedback. In this paper, we explore dynamic motivated belief patterns after feedback. We establish that positive feedback has a persistent effect on beliefs. Negative feedback, instead, influences beliefs in the short run, but this effect fades over time. We investigate the mechanisms of this dynamic pattern, and provide evidence for an asymmetry in the recall of feedback. Finally, we establish that, in line with theoretical accounts, incentives for belief accuracy mitigate the role of motivated reasoning.
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I present a model in which bank net worth determines both loan market competition and monetary transmission to firm borrowing rates. In the model, banks are local monopolists for borrowers near them. When they are flush with equity, banks expand their lending, compete for customers at the edges of their markets, and pass through changes in the monetary policy rate to their loan rates. When they lose substantial equity, banks consolidate, retreat from rivalry, and frustrate monetary transmission. The model explains why interest rate pass-through weakens after financial crises. Its predictions are consistent with several facts about bank-to-firm lending.
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We propose a new, price-based measure of information risk called abnormal idiosyncratic volatility (AIV) that captures information asymmetry faced by uninformed investors. AIV is the idiosyncratic volatility prior to information events in excess of normal levels. Using earnings announcements as information events, we show that AIV is positively associated with informed return run-ups, abnormal insider trading, short selling, and institutional trading during pre-earnings-announcement periods. We find that stocks with high AIV earn economically and statistically larger future returns than stocks with low AIV. Taken together, our findings support the notion that information risk is priced.
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We model the strategic interaction between fundamental investors and “back-runners,” whose only information is about the past order flow of fundamental investors. Back-runners partly infer fundamental investors’ information from their order flow and exploit it in subsequent trading. Fundamental investors counteract back-runners by randomizing their orders, unless back-runners’ signals are too imprecise. Surprisingly, a higher accuracy of back-runners’ order flow information can harm back-runners and benefit fundamental investors. As an application of the model, the common practice of payment for (retail) order flow reveals information about institutional order flow and enables back-runners to earn large profits.
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I examine the possibility of information‐based trading in a multiperiod consumption setting. I develop a necessary and sufficient condition for trade to occur. Intertemporal substitution introduces a desire to correlate current consumption with future aggregate shocks. When agents have heterogeneous time‐inseparable preferences, information differentially affects relative preferences for current and future consumption, making information‐based trading mutually acceptable. The no‐trade result continues to hold if there is no aggregate shock, or if agents have either homogeneous or time‐separable preferences.
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A large and rapidly growing literature examines the impact of misvaluation on firm policies by using mutual fund outflow‐induced price pressure to isolate nonfundamental price variation. I demonstrate that the standard approach to computing outflow‐induced price pressure produces a measure that is inadvertently a direct function of a stock's actual realized return during the outflow quarter, raising doubts about its orthogonality to fundamentals. After removing these direct measurements of return, outflows generate a fairly negligible quarterly decline in returns, with no subsequent reversal, and many established results in this literature no longer hold. I provide suggestions for future analysis.
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Shorting flows remain a significant predictor of negative future stock returns during 2010–2015, when daily short-sale volume data are published in real time. This predictability decays slowly and lasts for a year. Long-term shorting flows are more informative than short-term shorting flows. Indeed, abnormal short-term shorting flows do not predict future returns or anticipate bad news. We find that short sellers exploit prominent anomalies. A comparison with the Regulation SHO data indicates that the predictability is much shorter-term during 2005–2007. Short sellers appear to have shifted from trading on short-term private information to trading on long-term public information that is gradually incorporated into prices.
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How and to what extent do managerial control benefits shape the efficiency of the takeover market? We revisit this question by estimating both the dark and bright sides of managerial control benefits in an industry equilibrium model. On the dark side, managers’ private benefits of control distort firms’ takeover incentives and hinder the reallocation role of the takeover market. On the bright side, fear of a takeover induces underperforming managers to exert more effort and enhances the disciplinary role of the takeover market. Our estimates suggest that the bright-side effect increases the value created by an active takeover market by 21%, comparable in magnitude to the dark-side effect. It is also important to account for this bright-side effect in explaining certain features of the takeover market, including a low takeover-performance sensitivity.
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Using a comprehensive list of terrorist attacks over three decades, we find that aggregate investor risk aversion inversely relates to terrorist activity in the United States. A one standard deviation increase in the number of attacks each month leads to a 75.09 million drop in aggregate flows to equity funds and a 56.81 million increase to government bond funds. Tests on alternative channels further suggest that the shift in aggregate risk aversion is driven mainly by an emotional shock rather than changes in wealth or the outside environment. We also investigate possible alternate explanations for reduced flows to risky assets. Our evidence is consistent with a fear-induced increase in aggregate risk aversion.
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I study a contracting innovation that suddenly insulated traders of hedging contracts against counterparty risk: central clearing counterparties (CCPs) for derivatives. The first CCP was created in Le Havre (France) in 1882, in the coffee futures market. Using triple difference‐in‐differences estimation, I show that central clearing changed the geography of trade flows Europe‐wide, to the benefit of Le Havre. Inspecting the mechanism using trader‐level data, I find that the CCP solved both a “missing market” problem and adverse selection issues. Central clearing also facilitated entry of new traders in the market. The successful contracting innovation quickly spread to other exchanges.
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Journals
- American Economic Review (118)
- Journal of Finance (75)
- Journal of Financial Economics (151)
- Review of Financial Studies (141)
Topic
- Bond (36)
- CEO (15)
- Director (7)
- Capital Structure (2)
- Mergers and Acquisitions (2)
Resource type
- Journal Article (485)