Pub Date : 2025-12-30DOI: 10.1016/j.econlet.2025.112801
Xue Lei , Mustafa Kocoglu
Innovation drives long-term growth, yet its financing depends on credible R&D disclosures. When abnormal reporting spreads, it may contaminate the information environment for all firms. Using Chinese listed firms and exploiting exogenous variation from provincial audit environments and a 2018 tax reform, we find peer abnormal R&D intensity is negatively associated with innovation output, with patterns consistent with elevated financing constraints and reduced government subsidies. This association is stronger among high-capability innovators and private firms, suggesting a "bad money drives out good" dynamic. Fostering innovation requires protecting disclosure quality, not merely expanding financial support.
{"title":"Bad Money drives out good: Peer abnormal R&D intensity and innovation quality","authors":"Xue Lei , Mustafa Kocoglu","doi":"10.1016/j.econlet.2025.112801","DOIUrl":"10.1016/j.econlet.2025.112801","url":null,"abstract":"<div><div>Innovation drives long-term growth, yet its financing depends on credible R&D disclosures. When abnormal reporting spreads, it may contaminate the information environment for all firms. Using Chinese listed firms and exploiting exogenous variation from provincial audit environments and a 2018 tax reform, we find peer abnormal R&D intensity is negatively associated with innovation output, with patterns consistent with elevated financing constraints and reduced government subsidies. This association is stronger among high-capability innovators and private firms, suggesting a \"bad money drives out good\" dynamic. Fostering innovation requires protecting disclosure quality, not merely expanding financial support.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112801"},"PeriodicalIF":1.8,"publicationDate":"2025-12-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145880977","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 : 2025-12-29DOI: 10.1016/j.econlet.2025.112805
Y.F. Roumani, Z. AlSalman, A. Murphy
We apply a machine learning approach to estimate 1-year-ahead U.S. excess stock market returns over the 1964-2024 period using lagged inflation and output gap variables as inputs in a Taylor-rule framework. Utilizing a 60-month rolling training window, our Support Vector Regression (SVR) estimates account for 40% of the ex-post variation in realized excess returns. Subsample analysis confirms significant explanatory power across different monetary-policy environments. We show that the SVR framework captures nonlinear, time-varying relationships between Taylor-rule inputs and equity risk premia, suggesting that SVR effectively detects the dynamically complex interrelationships between the Federal Reserve’s policy targets and future equity returns.
{"title":"Effective machine learning estimates of stock market returns using Taylor-rule inputs","authors":"Y.F. Roumani, Z. AlSalman, A. Murphy","doi":"10.1016/j.econlet.2025.112805","DOIUrl":"10.1016/j.econlet.2025.112805","url":null,"abstract":"<div><div>We apply a machine learning approach to estimate 1-year-ahead U.S. excess stock market returns over the 1964-2024 period using lagged inflation and output gap variables as inputs in a Taylor-rule framework. Utilizing a 60-month rolling training window, our Support Vector Regression (SVR) estimates account for 40% of the ex-post variation in realized excess returns. Subsample analysis confirms significant explanatory power across different monetary-policy environments. We show that the SVR framework captures nonlinear, time-varying relationships between Taylor-rule inputs and equity risk premia, suggesting that SVR effectively detects the dynamically complex interrelationships between the Federal Reserve’s policy targets and future equity returns.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112805"},"PeriodicalIF":1.8,"publicationDate":"2025-12-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145880978","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 : 2025-12-29DOI: 10.1016/j.econlet.2025.112806
Konrad Raff
The model formalizes the idea that active monitoring by shareholders generates positive externalities for peer firms. Shareholders gather information to disentangle different performance factors and subsequently intervene with firm management. A cross-firm information externality arises because an intervention transmits private information about common industry conditions to peer firms. The externality has various implications: shareholders may benefit from closer monitoring at peer firms and mimic peer interventions. Monitoring choices are strategic substitutes. Externalities can provide a rationale for common ownership of informationally related firms.
{"title":"Information externalities in corporate governance","authors":"Konrad Raff","doi":"10.1016/j.econlet.2025.112806","DOIUrl":"10.1016/j.econlet.2025.112806","url":null,"abstract":"<div><div>The model formalizes the idea that active monitoring by shareholders generates positive externalities for peer firms. Shareholders gather information to disentangle different performance factors and subsequently intervene with firm management. A cross-firm information externality arises because an intervention transmits private information about common industry conditions to peer firms. The externality has various implications: shareholders may benefit from closer monitoring at peer firms and mimic peer interventions. Monitoring choices are strategic substitutes. Externalities can provide a rationale for common ownership of informationally related firms.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112806"},"PeriodicalIF":1.8,"publicationDate":"2025-12-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145881045","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 : 2025-12-29DOI: 10.1016/j.econlet.2025.112802
A. Sarath Babu , Chakrapani Chaturvedula , Nikhil Rastogi , K. Sriharsha Reddy
Dividend initiations (DI) signal prospects but may invite insider trading via pre-announcement leaks, particularly in weak enforcement environments. Using 650 DI events from India (2002–2024), we find positive cumulative abnormal returns (CARs) signalling such activity. Foreign Institutional Investors (FIIs) ownership curbs CARs more than Domestic Institutional Investors (DIIs) pre-reform, revealing an inverted U dynamic where FII monitoring peaks under weak enforcement but wanes post-Prohibition of Insider Trading Regulations (PITR)- 2015 due to substitution, while DIIs remain muted. Our results underscore the reforms' independent effectiveness and diminished dependence on foreign monitoring, guiding Securities and Exchange Board of India (SEBI) towards strengthening domestic institutional capabilities.
{"title":"Dividend initiations, regulatory reforms, and institutional monitoring of insider trading: Evidence from India","authors":"A. Sarath Babu , Chakrapani Chaturvedula , Nikhil Rastogi , K. Sriharsha Reddy","doi":"10.1016/j.econlet.2025.112802","DOIUrl":"10.1016/j.econlet.2025.112802","url":null,"abstract":"<div><div>Dividend initiations (DI) signal prospects but may invite insider trading via pre-announcement leaks, particularly in weak enforcement environments. Using 650 DI events from India (2002–2024), we find positive cumulative abnormal returns (CARs) signalling such activity. Foreign Institutional Investors (FIIs) ownership curbs CARs more than Domestic Institutional Investors (DIIs) pre-reform, revealing an inverted U dynamic where FII monitoring peaks under weak enforcement but wanes post-Prohibition of Insider Trading Regulations (PITR)- 2015 due to substitution, while DIIs remain muted. Our results underscore the reforms' independent effectiveness and diminished dependence on foreign monitoring, guiding Securities and Exchange Board of India (SEBI) towards strengthening domestic institutional capabilities.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112802"},"PeriodicalIF":1.8,"publicationDate":"2025-12-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145881044","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 : 2025-12-27DOI: 10.1016/j.econlet.2025.112798
Rolf Färe , Giannis Karagiannis
In this note we re-examine Shaffer and Spierdijk (2020) conditions for the aggregate Lerner index to be equal to the weighted-average of product-specific Lerner indices and we show that they can be made weaker than assuming a separable cost function with a linear output aggregation function. In particular, we verify that the aggregate Lerner index is equal to the weighted average of the product-specific Lerner indices, with revenue share as weights, if the cost function is separable in outputs and the output aggregation function is linearly homogenous.
{"title":"A note on measuring multi-product market power using the lerner index","authors":"Rolf Färe , Giannis Karagiannis","doi":"10.1016/j.econlet.2025.112798","DOIUrl":"10.1016/j.econlet.2025.112798","url":null,"abstract":"<div><div>In this note we re-examine Shaffer and Spierdijk (2020) conditions for the aggregate Lerner index to be equal to the weighted-average of product-specific Lerner indices and we show that they can be made weaker than assuming a separable cost function with a linear output aggregation function. In particular, we verify that the aggregate Lerner index is equal to the weighted average of the product-specific Lerner indices, with revenue share as weights, if the cost function is separable in outputs and the output aggregation function is linearly homogenous.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112798"},"PeriodicalIF":1.8,"publicationDate":"2025-12-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145880979","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 : 2025-12-26DOI: 10.1016/j.econlet.2025.112774
Mickael Beaud, Yujiang Sun, Marc Willinger
While various models of inequality aversion predict different effects of background risk on giving, empirical evidence remains mixed. This study presents a laboratory experiment using a modified dictator game to examine whether exposure to an additive, zero-mean background risk affecting endowments influences giving behavior. Our results show that such exposure does not significantly affect average donation amounts, the likelihood of giving nothing, or the tendency to split resources equally. These findings are consistent with ex ante inequality concerns under risk neutrality; however, overall, our experimental data do not support the behavioral predictions implied by purely ex post inequality aversion.
{"title":"No effect of endowment risk on dictator giving in the lab","authors":"Mickael Beaud, Yujiang Sun, Marc Willinger","doi":"10.1016/j.econlet.2025.112774","DOIUrl":"10.1016/j.econlet.2025.112774","url":null,"abstract":"<div><div>While various models of inequality aversion predict different effects of background risk on giving, empirical evidence remains mixed. This study presents a laboratory experiment using a modified dictator game to examine whether exposure to an additive, zero-mean background risk affecting endowments influences giving behavior. Our results show that such exposure does not significantly affect average donation amounts, the likelihood of giving nothing, or the tendency to split resources equally. These findings are consistent with <em>ex ante</em> inequality concerns under risk neutrality; however, overall, our experimental data do not support the behavioral predictions implied by purely <em>ex post</em> inequality aversion.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112774"},"PeriodicalIF":1.8,"publicationDate":"2025-12-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145880980","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 : 2025-12-22DOI: 10.1016/j.econlet.2025.112779
Fan Dora Xia, Xingyu Sonya Zhu
We analyze how short-term government bond yields in the United States, United Kingdom, and Canada respond to inflation and labor market news to infer the monetary policy reaction function as perceived by financial markets. Our findings reveal that the perceived reaction function varies across countries and evolves over time. Furthermore, we document significant spillovers from U.S. macroeconomic news to other countries, underscoring the pivotal role of U.S. monetary policy in shaping the global financial system.
{"title":"Macroeconomic news and repricing of monetary policy expectations","authors":"Fan Dora Xia, Xingyu Sonya Zhu","doi":"10.1016/j.econlet.2025.112779","DOIUrl":"10.1016/j.econlet.2025.112779","url":null,"abstract":"<div><div>We analyze how short-term government bond yields in the United States, United Kingdom, and Canada respond to inflation and labor market news to infer the monetary policy reaction function as perceived by financial markets. Our findings reveal that the perceived reaction function varies across countries and evolves over time. Furthermore, we document significant spillovers from U.S. macroeconomic news to other countries, underscoring the pivotal role of U.S. monetary policy in shaping the global financial system.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112779"},"PeriodicalIF":1.8,"publicationDate":"2025-12-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145881109","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 : 2025-12-20DOI: 10.1016/j.econlet.2025.112773
Philippe Goulet Coulombe , Karin Klieber
The use of moving averages is pervasive in macroeconomic monitoring, particularly for tracking noisy series like inflation. The choice of the look-back window is crucial. Too long of a moving average is not timely enough when faced with rapidly evolving conditions. Too narrow averages are noisy, limiting signal extraction capabilities. This is a time-varying bias–variance trade-off: the optimal look-back window depends on current macroeconomic conditions. In this paper, we introduce a simple adaptive moving average estimator based on a Random Forest using as sole predictor a time trend. Then, we compare the narratives inferred from the new estimator to those derived from common alternatives across key macroeconomic indicators.
{"title":"An adaptive moving average for macroeconomic monitoring","authors":"Philippe Goulet Coulombe , Karin Klieber","doi":"10.1016/j.econlet.2025.112773","DOIUrl":"10.1016/j.econlet.2025.112773","url":null,"abstract":"<div><div>The use of moving averages is pervasive in macroeconomic monitoring, particularly for tracking noisy series like inflation. The choice of the look-back window is crucial. Too long of a moving average is not timely enough when faced with rapidly evolving conditions. Too narrow averages are noisy, limiting signal extraction capabilities. This is a time-varying bias–variance trade-off: the optimal look-back window depends on current macroeconomic conditions. In this paper, we introduce a simple <em>adaptive</em> moving average estimator based on a Random Forest using as sole predictor a time trend. Then, we compare the narratives inferred from the new estimator to those derived from common alternatives across key macroeconomic indicators.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112773"},"PeriodicalIF":1.8,"publicationDate":"2025-12-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145837604","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 : 2025-12-20DOI: 10.1016/j.econlet.2025.112795
Florian Zimmermann, Matthias Collischon
Research has long highlighted the role of social capital for labor market outcomes, but gendered processes received surprisingly little attention. Employing representative German survey data, we analyze differences in job search via social networks. Contrary to expectations, we find that women report using social networks more often at the extensive margin compared to men, but men are more likely utilize networks in ways requiring more effort, such as being introduced to employers. Thus, we highlight the importance of investigating social networks in detail to understand the role of social networks for generating or sustaining gender inequalities in the labor market.
{"title":"Women use Social Networks for Job Search more often than Men, but Men use them more intensely","authors":"Florian Zimmermann, Matthias Collischon","doi":"10.1016/j.econlet.2025.112795","DOIUrl":"10.1016/j.econlet.2025.112795","url":null,"abstract":"<div><div>Research has long highlighted the role of social capital for labor market outcomes, but gendered processes received surprisingly little attention. Employing representative German survey data, we analyze differences in job search via social networks. Contrary to expectations, we find that women report using social networks more often at the extensive margin compared to men, but men are more likely utilize networks in ways requiring more effort, such as being introduced to employers. Thus, we highlight the importance of investigating social networks in detail to understand the role of social networks for generating or sustaining gender inequalities in the labor market.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112795"},"PeriodicalIF":1.8,"publicationDate":"2025-12-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145837633","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 : 2025-12-19DOI: 10.1016/j.econlet.2025.112796
Jérémie Bertrand , Valentina Febo
Borrower discouragement occurs when eligible firms avoid applying for credit due to anticipated rejection. Using data from the World Bank’s Enterprise Surveys and cultural measures from the World Values Survey, we show that intra-cultural variation in individualism increases discouragement, thereby advancing insights about cultural effects on economic behavior and access to credit.
{"title":"Intra-cultural variation in individualism and credit discouragement","authors":"Jérémie Bertrand , Valentina Febo","doi":"10.1016/j.econlet.2025.112796","DOIUrl":"10.1016/j.econlet.2025.112796","url":null,"abstract":"<div><div>Borrower discouragement occurs when eligible firms avoid applying for credit due to anticipated rejection. Using data from the World Bank’s Enterprise Surveys and cultural measures from the World Values Survey, we show that intra-cultural variation in individualism increases discouragement, thereby advancing insights about cultural effects on economic behavior and access to credit.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112796"},"PeriodicalIF":1.8,"publicationDate":"2025-12-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145836850","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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