Pub Date : 2024-09-28DOI: 10.1016/j.econlet.2024.111994
We gauge the impact of news and other relevant external uncertainties facing airline firms via an equity market lens. Using local projections, we establish that rising investors’ fear shocks have long-lasting negative effects on airline industry equity returns, while increasing geopolitical, climate policy, and fuel cost uncertainties have comparatively short-lived impacts. Our results are robust to several alternative model specifications, including a pre-pandemic subsample. Based on our findings, we provide a promising avenue for future research in airline financial management.
{"title":"Airline industry equities under external uncertainty shocks","authors":"","doi":"10.1016/j.econlet.2024.111994","DOIUrl":"10.1016/j.econlet.2024.111994","url":null,"abstract":"<div><div>We gauge the impact of news and other relevant external uncertainties facing airline firms via an equity market lens. Using local projections, we establish that rising investors’ fear shocks have long-lasting negative effects on airline industry equity returns, while increasing geopolitical, climate policy, and fuel cost uncertainties have comparatively short-lived impacts. Our results are robust to several alternative model specifications, including a pre-pandemic subsample. Based on our findings, we provide a promising avenue for future research in airline financial management.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2024-09-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142358744","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-09-26DOI: 10.1016/j.econlet.2024.111992
Determining whether Global Average Temperature (GAT) is an integrated process of order 1, I(1), or a stationary process around a trend function is crucial for detection, attribution, impact, and forecasting studies of climate change. In this paper, we investigate the nature of trends in GAT building on the analysis of individual temperature grids. Our micro-founded evidence suggests that GAT is stationary around a non-linear deterministic trend in the form of a linear function with one structural break. This break can be attributed to a combination of breaks on individual grids and the standard aggregation method under acceleration in global warming.
确定全球平均气温（GAT）是一个阶数为 1 的综合过程（I(1)），还是一个围绕趋势函数的静止过程，对于气候变化的探测、归因、影响和预测研究至关重要。在本文中，我们在分析单个温度网格的基础上研究了 GAT 趋势的性质。我们的微观证据表明，GAT 是围绕一个线性函数形式的非线性确定性趋势静止的，但有一个结构断点。这一断裂可归因于单个网格的断裂和全球变暖加速情况下的标准汇总方法。
{"title":"Trends in temperature data: Micro-foundations of their nature","authors":"","doi":"10.1016/j.econlet.2024.111992","DOIUrl":"10.1016/j.econlet.2024.111992","url":null,"abstract":"<div><div>Determining whether Global Average Temperature (GAT) is an integrated process of order 1, I(1), or a stationary process around a trend function is crucial for detection, attribution, impact, and forecasting studies of climate change. In this paper, we investigate the nature of trends in GAT building on the analysis of individual temperature grids. Our micro-founded evidence suggests that GAT is stationary around a non-linear deterministic trend in the form of a linear function with one structural break. This break can be attributed to a combination of breaks on individual grids and the standard aggregation method under acceleration in global warming.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2024-09-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142326746","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-09-24DOI: 10.1016/j.econlet.2024.111993
We characterize the probabilistic version of the Boston mechanism from Han (2024). This mechanism uniquely satisfies respect for rank, equal-rank ex-ante stability, and equal-rank equal-priority ordinal fairness. Additionally, it uniquely selects the rank-based leximin-optimal allocation among all equal-rank ex-ante stable allocations.
{"title":"Characterizing a probabilistic version of the Boston mechanism under weak priorities","authors":"","doi":"10.1016/j.econlet.2024.111993","DOIUrl":"10.1016/j.econlet.2024.111993","url":null,"abstract":"<div><div>We characterize the probabilistic version of the Boston mechanism from Han (2024). This mechanism uniquely satisfies respect for rank, equal-rank ex-ante stability, and equal-rank equal-priority ordinal fairness. Additionally, it uniquely selects the rank-based leximin-optimal allocation among all equal-rank ex-ante stable allocations.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2024-09-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142326745","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-09-24DOI: 10.1016/j.econlet.2024.111996
This paper examines the impact of political connections of independent board directors on earnings quality. We used two proxies of earnings quality, namely, discretionary accruals and real earnings management. Based on a sample of 1,936 firm-year observations from 2012 to 2022, our results reveal that firms with politically connected independent directors are more likely to display lower earnings quality in higher discretionary accruals and greater real activities manipulation. These results suggest that the monitoring role of independent directors in constraining earnings management practices, as emphasized by the agency theory, may be compromised by political connections.
{"title":"Political connections of independent directors and earnings quality: The case of French firms","authors":"","doi":"10.1016/j.econlet.2024.111996","DOIUrl":"10.1016/j.econlet.2024.111996","url":null,"abstract":"<div><div>This paper examines the impact of political connections of independent board directors on earnings quality. We used two proxies of earnings quality, namely, discretionary accruals and real earnings management. Based on a sample of 1,936 firm-year observations from 2012 to 2022, our results reveal that firms with politically connected independent directors are more likely to display lower earnings quality in higher discretionary accruals and greater real activities manipulation. These results suggest that the monitoring role of independent directors in constraining earnings management practices, as emphasized by the agency theory, may be compromised by political connections.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2024-09-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142322456","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-09-24DOI: 10.1016/j.econlet.2024.111995
This study investigates how the informativeness of analyst forecasts affects managers’ financial reporting incentives. Using a novel Match Index to estimate the earnings management induced by analyst forecasts, we find that when analyst forecasts are less informative, managers place less value on using them as a benchmark and thus, engage in less earnings management to meet that benchmark.
{"title":"Does analyst forecast informativeness affect managers’ financial reporting incentives?","authors":"","doi":"10.1016/j.econlet.2024.111995","DOIUrl":"10.1016/j.econlet.2024.111995","url":null,"abstract":"<div><div>This study investigates how the informativeness of analyst forecasts affects managers’ financial reporting incentives. Using a novel Match Index to estimate the earnings management induced by analyst forecasts, we find that when analyst forecasts are less informative, managers place less value on using them as a benchmark and thus, engage in less earnings management to meet that benchmark.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2024-09-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142326747","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-09-21DOI: 10.1016/j.econlet.2024.111975
Pritchett (1994) influentially examined the relationship between survey-reported ideal fertility and period total fertility rates. Pritchett’s analyses found that country-period by country-period differences in fertility preferences could statistically account for the majority of the variation in period total fertility rates. This result was impactful because it suggested that preferences, rather than constraints such as contraceptive access, explain fertility outcomes. However, because Pritchett’s analysis documented a correlation between two period measures, it cannot say whether a cohort of women achieves their fertility preferences, on average, over a life course. In the three decades since Pritchett’s paper, a longer span of repeated cross-section data has been collected that allows us to revisit this question with data that tracks cohorts of women as they age. In this paper, we update this evidence by examining the relationship between ideal fertility in early adulthood and completed fertility for the same cohort of women in later adulthood. We find that the prior result replicates: The relationship between fertility preferences and completed cohort fertility is, if anything, even stronger in our data.
{"title":"Do fertility preferences in early adulthood predict later average fertility outcomes of the same cohort?: Pritchett (1994) revisited with cohort data","authors":"","doi":"10.1016/j.econlet.2024.111975","DOIUrl":"10.1016/j.econlet.2024.111975","url":null,"abstract":"<div><div>Pritchett (1994) influentially examined the relationship between survey-reported ideal fertility and period total fertility rates. Pritchett’s analyses found that country-period by country-period differences in fertility preferences could statistically account for the majority of the variation in period total fertility rates. This result was impactful because it suggested that preferences, rather than constraints such as contraceptive access, explain fertility outcomes. However, because Pritchett’s analysis documented a correlation between two <em>period</em> measures, it cannot say whether a <em>cohort</em> of women achieves their fertility preferences, on average, over a life course. In the three decades since Pritchett’s paper, a longer span of repeated cross-section data has been collected that allows us to revisit this question with data that tracks cohorts of women as they age. In this paper, we update this evidence by examining the relationship between ideal fertility in early adulthood and completed fertility for the same cohort of women in later adulthood. We find that the prior result replicates: The relationship between fertility preferences and completed cohort fertility is, if anything, even stronger in our data.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2024-09-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142315714","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-09-21DOI: 10.1016/j.econlet.2024.111979
We study human behavior in ultimatum game when interacting with either human or algorithmic opponents. We examine how the type of the AI algorithm (mimicking human behavior, optimising gains, or providing no explanation) and the presence of a human beneficiary affect sending and accepting behaviors. Our experimental data reveal that subjects generally do not differentiate between human and algorithmic opponents, between different algorithms, and between an explained and unexplained algorithm. However, they are more willing to forgo higher payoffs when the algorithm’s earnings benefit a human.
{"title":"Ultimatum bargaining: Algorithms vs. Humans","authors":"","doi":"10.1016/j.econlet.2024.111979","DOIUrl":"10.1016/j.econlet.2024.111979","url":null,"abstract":"<div><div>We study human behavior in ultimatum game when interacting with either human or algorithmic opponents. We examine how the type of the AI algorithm (mimicking human behavior, optimising gains, or providing no explanation) and the presence of a human beneficiary affect sending and accepting behaviors. Our experimental data reveal that subjects generally do not differentiate between human and algorithmic opponents, between different algorithms, and between an explained and unexplained algorithm. However, they are more willing to forgo higher payoffs when the algorithm’s earnings benefit a human.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2024-09-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S0165176524004634/pdfft?md5=7035d59c89d338f0eefef616934e5cf0&pid=1-s2.0-S0165176524004634-main.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142310275","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-09-21DOI: 10.1016/j.econlet.2024.111981
Financial education can influence the level of financial literacy. In each country, political incentives can shape financial education policies. Political activism in financial education can be motivated by concerns over financial instability. This theoretical relationship is empirically validated applying text analysis. By using financial education narratives as a proxy for political activism among European Parliament politicians from 1997 to 2024, we test whether financial instability cases matter in explaining political activism in financial education.
{"title":"European politicians and financial literacy activism: Does financial (in)stability matter?","authors":"","doi":"10.1016/j.econlet.2024.111981","DOIUrl":"10.1016/j.econlet.2024.111981","url":null,"abstract":"<div><div>Financial education can influence the level of financial literacy. In each country, political incentives can shape financial education policies. Political activism in financial education can be motivated by concerns over financial instability. This theoretical relationship is empirically validated applying text analysis. By using financial education narratives as a proxy for political activism among European Parliament politicians from 1997 to 2024, we test whether financial instability cases matter in explaining political activism in financial education.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2024-09-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142315715","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-09-19DOI: 10.1016/j.econlet.2024.111989
This paper explores the impact of probability distortion on investors’ participation decisions and market performance. Specifically, we construct a one-period investment model with two types of investors—probabilistic pessimistic and neutral investors. The former assign more weight to bad outcomes and tail events when making decisions. Our findings suggest that non-participation arises from these probabilistic pessimistic investors. In equilibrium, their participation decisions affect the asset premium, which can be decomposed into the risk premium and probabilistic premium.
{"title":"Probability distortion and non-participation","authors":"","doi":"10.1016/j.econlet.2024.111989","DOIUrl":"10.1016/j.econlet.2024.111989","url":null,"abstract":"<div><div>This paper explores the impact of probability distortion on investors’ participation decisions and market performance. Specifically, we construct a one-period investment model with two types of investors—probabilistic pessimistic and neutral investors. The former assign more weight to bad outcomes and tail events when making decisions. Our findings suggest that non-participation arises from these probabilistic pessimistic investors. In equilibrium, their participation decisions affect the asset premium, which can be decomposed into the risk premium and probabilistic premium.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2024-09-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142310276","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-09-19DOI: 10.1016/j.econlet.2024.111984
We test for the existence of climate change risks in corporate bond returns. Using risk factors based on textual analysis of news articles, we estimate the sensitivity of bonds to climate change news. Bonds that covary highly with global warming news earn lower returns. We also test whether economic policy uncertainty moderates the relationship between bond returns and climate news risk. The lower returns to high climate-risk bonds are driven by periods of high economic policy uncertainty. Therefore, investors increase their demand for bonds that perform better in periods of high global warming risks, especially when economic uncertainty is high.
{"title":"Climate risks, corporate bonds, and economic uncertainty","authors":"","doi":"10.1016/j.econlet.2024.111984","DOIUrl":"10.1016/j.econlet.2024.111984","url":null,"abstract":"<div><p>We test for the existence of climate change risks in corporate bond returns. Using risk factors based on textual analysis of news articles, we estimate the sensitivity of bonds to climate change news. Bonds that covary highly with global warming news earn lower returns. We also test whether economic policy uncertainty moderates the relationship between bond returns and climate news risk. The lower returns to high climate-risk bonds are driven by periods of high economic policy uncertainty. Therefore, investors increase their demand for bonds that perform better in periods of high global warming risks, especially when economic uncertainty is high.</p></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2024-09-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142274018","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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