We estimate a narrative factor pricing model from news text of The Wall Street Journal. Our empirical method integrates topic modeling (LDA), latent factor analysis (IPCA), and variable selection (group lasso). Narrative factors achieve higher out-of-sample Sharpe ratios and smaller pricing errors than standard characteristic-based factor models and predict future investment opportunities in a manner consistent with the ICAPM. We derive an interpretation of the estimated risk factors from narratives in the underlying article text.
{"title":"Narrative Asset Pricing: Interpretable Systematic Risk Factors from News Text","authors":"Leland Bybee, B. Kelly, Yi-Kai Su","doi":"10.2139/ssrn.3895277","DOIUrl":"https://doi.org/10.2139/ssrn.3895277","url":null,"abstract":"\u0000 We estimate a narrative factor pricing model from news text of The Wall Street Journal. Our empirical method integrates topic modeling (LDA), latent factor analysis (IPCA), and variable selection (group lasso). Narrative factors achieve higher out-of-sample Sharpe ratios and smaller pricing errors than standard characteristic-based factor models and predict future investment opportunities in a manner consistent with the ICAPM. We derive an interpretation of the estimated risk factors from narratives in the underlying article text.","PeriodicalId":170638,"journal":{"name":"Johns Hopkins Carey Business School Research Paper Series","volume":"29 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-07-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116500807","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We survey the literature on structural models for the prescription drug market, which has attracted significant attention from researchers in marketing and economics, and related fields. The literature has evolved from adopting standard structural models developed for other markets to models that are specifically designed to capture the institutional details of the prescription drug market. Along the way, these empirical frameworks have not only greatly improved in terms of explaining stylized facts, but also in terms of producing better counterfactual predictions. Topics covered by this survey include the application of learning models to explain slow diffusion, post-patent expiry competition, prepatent expiry competition, R&D and new drug introduction, managerial and public policy analysis, and the economics of the Medicare Part-D program. We conclude by discussing future research directions.
{"title":"Structural Models of the Prescription Drug Market","authors":"Andrew T. Ching, Manuel Hermosilla, Qiang Liu","doi":"10.2139/ssrn.3348196","DOIUrl":"https://doi.org/10.2139/ssrn.3348196","url":null,"abstract":"We survey the literature on structural models for the prescription drug market, which has attracted significant attention from researchers in marketing and economics, and related fields. The literature has evolved from adopting standard structural models developed for other markets to models that are specifically designed to capture the institutional details of the prescription drug market. Along the way, these empirical frameworks have not only greatly improved in terms of explaining stylized facts, but also in terms of producing better counterfactual predictions. Topics covered by this survey include the application of learning models to explain slow diffusion, post-patent expiry competition, prepatent expiry competition, R&D and new drug introduction, managerial and public policy analysis, and the economics of the Medicare Part-D program. We conclude by discussing future research directions.","PeriodicalId":170638,"journal":{"name":"Johns Hopkins Carey Business School Research Paper Series","volume":"39 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131057447","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Emilia Simeonova, Niels Skipper, Peter R. Thingholm
What makes some physicians perform better than others? This paper examines two different channels through which primary care doctors’ patient management styles can affect health outcomes: by prescribing the appropriate clinical therapy and by inspiring better patient health management, as reflected in the patient’s adherence to that therapy. Using data on the population of statin-users in Denmark that matches patients to primary care physicians, we show that the impact of a physician’s clinical quality on patient health outcomes is largely explained by the composition of patients in the physician’s practice. In contrast, the physician’s skill in facilitating adherence to prescription drugs maintains large and positive effects on patient outcomes even after controlling for patient composition. We also show that the health effects of adherence to commonly prescribed anti-cholesterol drugs are large and significant.
{"title":"Do High Quality Physicians Have High Quality Patients?","authors":"Emilia Simeonova, Niels Skipper, Peter R. Thingholm","doi":"10.2139/ssrn.3303958","DOIUrl":"https://doi.org/10.2139/ssrn.3303958","url":null,"abstract":"What makes some physicians perform better than others? This paper examines two different channels through which primary care doctors’ patient management styles can affect health outcomes: by prescribing the appropriate clinical therapy and by inspiring better patient health management, as reflected in the patient’s adherence to that therapy. Using data on the population of statin-users in Denmark that matches patients to primary care physicians, we show that the impact of a physician’s clinical quality on patient health outcomes is largely explained by the composition of patients in the physician’s practice. In contrast, the physician’s skill in facilitating adherence to prescription drugs maintains large and positive effects on patient outcomes even after controlling for patient composition. We also show that the health effects of adherence to commonly prescribed anti-cholesterol drugs are large and significant.","PeriodicalId":170638,"journal":{"name":"Johns Hopkins Carey Business School Research Paper Series","volume":"155 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132866644","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Mortgage dollar roll, the most common financing strategy for agency MBS, differs from repo in that the returned collateral can differ from those received. Also, MBS ownership changes hands in the funding period. We show that dollar roll “specialness,” how much implied financing rates fall below MBS repo rates, (1) increases in the value of the cheapest-to-deliver option, (2) decreases in the leverage of primary dealers, (3) decreases in prepayment risk exposure during the financing period, and (4) decreases in MBS returns. The Federal Reserve’s dollar roll sales in quantitative easing operations are associated with lower specialness. Received February 3, 2016; editorial decision July 30, 2018 by Editor Itay Goldstein. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.
{"title":"Mortgage Dollar Roll","authors":"Zhaogang Song, Haoxiang Zhu","doi":"10.2139/ssrn.2401319","DOIUrl":"https://doi.org/10.2139/ssrn.2401319","url":null,"abstract":"\u0000 Mortgage dollar roll, the most common financing strategy for agency MBS, differs from repo in that the returned collateral can differ from those received. Also, MBS ownership changes hands in the funding period. We show that dollar roll “specialness,” how much implied financing rates fall below MBS repo rates, (1) increases in the value of the cheapest-to-deliver option, (2) decreases in the leverage of primary dealers, (3) decreases in prepayment risk exposure during the financing period, and (4) decreases in MBS returns. The Federal Reserve’s dollar roll sales in quantitative easing operations are associated with lower specialness.\u0000 Received February 3, 2016; editorial decision July 30, 2018 by Editor Itay Goldstein. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.","PeriodicalId":170638,"journal":{"name":"Johns Hopkins Carey Business School Research Paper Series","volume":"38 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124555019","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Manuel Hermosilla, Fernanda Gutiérrez-Navratil, J. Prieto-Rodriguez
In various cultural and behavioral respects, emerging market consumers differ significantly from their counterparts of developed markets. They may thus derive consumption utility from different asp...
{"title":"Can Emerging Markets Tilt Global Product Design? Impacts of Chinese Colorism on Hollywood Castings","authors":"Manuel Hermosilla, Fernanda Gutiérrez-Navratil, J. Prieto-Rodriguez","doi":"10.2139/ssrn.3047403","DOIUrl":"https://doi.org/10.2139/ssrn.3047403","url":null,"abstract":"In various cultural and behavioral respects, emerging market consumers differ significantly from their counterparts of developed markets. They may thus derive consumption utility from different asp...","PeriodicalId":170638,"journal":{"name":"Johns Hopkins Carey Business School Research Paper Series","volume":"57 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-10-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123366468","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Whereas the extant literature on entry-order effects establishes that first entrants often earn higher market shares ("market-share advantage"), the literature on distribution suggests increased distribution has a positive effect on sales. Can distribution help us better understand entry-order effects on market shares? This paper examines how the first entrant in a geographical market achieves a market-share advantage through distribution. For this purpose, I propose a simple method of decomposing sales into physical distribution and sales performance. The data come from a manually collected panel on six major Japanese convenience-store chains from 47 geographical markets between 1991 and 2007. Using an instrumental variable approach to deal with the potential endogeneity of entry order, I find the market-share advantage for the first chain brand is positive. Specifically, the physical distribution, measured by the number of outlets in a market, drives most of the advantage. This paper further finds the density of own outlets is nonmonotonically related (inverted U) to sales performance per outlet, suggesting dynamic outlet expansion faces a trade-off between business-stealing effects within a chain ("cannibalization") and advertising effects through repetition.
{"title":"First-Mover Advantage through Distribution: A Decomposition Approach","authors":"Mitsukuni Nishida","doi":"10.2139/ssrn.2212215","DOIUrl":"https://doi.org/10.2139/ssrn.2212215","url":null,"abstract":"Whereas the extant literature on entry-order effects establishes that first entrants often earn higher market shares (\"market-share advantage\"), the literature on distribution suggests increased distribution has a positive effect on sales. Can distribution help us better understand entry-order effects on market shares? This paper examines how the first entrant in a geographical market achieves a market-share advantage through distribution. For this purpose, I propose a simple method of decomposing sales into physical distribution and sales performance. The data come from a manually collected panel on six major Japanese convenience-store chains from 47 geographical markets between 1991 and 2007. Using an instrumental variable approach to deal with the potential endogeneity of entry order, I find the market-share advantage for the first chain brand is positive. Specifically, the physical distribution, measured by the number of outlets in a market, drives most of the advantage. This paper further finds the density of own outlets is nonmonotonically related (inverted U) to sales performance per outlet, suggesting dynamic outlet expansion faces a trade-off between business-stealing effects within a chain (\"cannibalization\") and advertising effects through repetition.","PeriodicalId":170638,"journal":{"name":"Johns Hopkins Carey Business School Research Paper Series","volume":"21 3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-04-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124665224","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Mitsukuni Nishida, Amil Petrin, M. Rotemberg, T. Kirk White
In this paper, we discuss the role that data processing and collection have for the measurement of misallocation. First, we turn to the raw self-reported data for the US, reflecting what can be found in most developing countries. In the raw data, measured misallocation (following Hsieh and Klenow 2009) is substantially higher than for any other country for which we have census data. For instance, if Indian firms had the same dispersion of distortions as measured in the reported US data, TFP in the Indian manufacturing sector would decrease by around 2/3. Second, we follow a different strategy for editing and imputing missing data than what is used by the US Census Bureau, by using a method that seeks to replicate the true variance in the underlying data generating process known as Classification and Regression Trees (CART). This change raises the potential gains from removing misallocation in the United States manufacturing sector by around 10%.
{"title":"Measuring Cross-Country Differences in Misallocation","authors":"Mitsukuni Nishida, Amil Petrin, M. Rotemberg, T. Kirk White","doi":"10.2139/ssrn.2869246","DOIUrl":"https://doi.org/10.2139/ssrn.2869246","url":null,"abstract":"In this paper, we discuss the role that data processing and collection have for the measurement of misallocation. First, we turn to the raw self-reported data for the US, reflecting what can be found in most developing countries. In the raw data, measured misallocation (following Hsieh and Klenow 2009) is substantially higher than for any other country for which we have census data. For instance, if Indian firms had the same dispersion of distortions as measured in the reported US data, TFP in the Indian manufacturing sector would decrease by around 2/3. Second, we follow a different strategy for editing and imputing missing data than what is used by the US Census Bureau, by using a method that seeks to replicate the true variance in the underlying data generating process known as Classification and Regression Trees (CART). This change raises the potential gains from removing misallocation in the United States manufacturing sector by around 10%.","PeriodicalId":170638,"journal":{"name":"Johns Hopkins Carey Business School Research Paper Series","volume":"79 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134350308","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Gianluca Benigno, Huigang Chen, A. Rebucci, Christopher Otrok, Eric R. Young
In the aftermath of the global financial crisis, a new policy paradigm has emerged in which old-fashioned policies such as capital controls and other government distortions have become part of the standard policy toolkit (the so-called macro-prudential policies). On the wave of this seemingly unanimous policy consensus, a new strand of theoretical literature contends that capital controls are welfare enhancing and can be justified rigorously because of second-best considerations. Within the same theoretical framework adopted in this fast-growing literature, we show that a credible commitment to support the exchange rate in crisis times always welfare-dominates prudential capital controls as it can achieve the unconstrained allocation.
{"title":"Capital Controls or Real Exchange Rate Policy? A Pecuniary Externality Perspective","authors":"Gianluca Benigno, Huigang Chen, A. Rebucci, Christopher Otrok, Eric R. Young","doi":"10.2139/ssrn.2275159","DOIUrl":"https://doi.org/10.2139/ssrn.2275159","url":null,"abstract":"In the aftermath of the global financial crisis, a new policy paradigm has emerged in which old-fashioned policies such as capital controls and other government distortions have become part of the standard policy toolkit (the so-called macro-prudential policies). On the wave of this seemingly unanimous policy consensus, a new strand of theoretical literature contends that capital controls are welfare enhancing and can be justified rigorously because of second-best considerations. Within the same theoretical framework adopted in this fast-growing literature, we show that a credible commitment to support the exchange rate in crisis times always welfare-dominates prudential capital controls as it can achieve the unconstrained allocation.","PeriodicalId":170638,"journal":{"name":"Johns Hopkins Carey Business School Research Paper Series","volume":"25 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131072456","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We examine firm’s cash holdings from the perspective of the agency cost of debt and find that firms with outstanding loans hold significantly less cash than firms without outstanding loans. This relationship is particularly stronger in financially constrained firms with higher hedging needs, suggesting that it the creditor control but not the voluntary reduction that leads to lower level of cash holdings because cash is more valuable to those firms. We show that creditors influence firms’ cash holdings by setting up stricter covenants in those with more excess cash especially when there is higher information opacity, financial constraints with higher hedging needs and higher agency cost of debt. Results also show that covenants are effective in reducing cash holdings. Lastly, we study how cash changes around covenant violation where creditors could exert direct influence on firms’ cash holding policies. We find that while cash increases in the firms that fail to meet financial performance covenants, those with managerial violations actually experience significant cash reductions.
{"title":"Creditor Control Rights and Firm Cash Holdings","authors":"Bill Francis, Xian Sun, Qiang Wu","doi":"10.2139/ssrn.2567569","DOIUrl":"https://doi.org/10.2139/ssrn.2567569","url":null,"abstract":"We examine firm’s cash holdings from the perspective of the agency cost of debt and find that firms with outstanding loans hold significantly less cash than firms without outstanding loans. This relationship is particularly stronger in financially constrained firms with higher hedging needs, suggesting that it the creditor control but not the voluntary reduction that leads to lower level of cash holdings because cash is more valuable to those firms. We show that creditors influence firms’ cash holdings by setting up stricter covenants in those with more excess cash especially when there is higher information opacity, financial constraints with higher hedging needs and higher agency cost of debt. Results also show that covenants are effective in reducing cash holdings. Lastly, we study how cash changes around covenant violation where creditors could exert direct influence on firms’ cash holding policies. We find that while cash increases in the firms that fail to meet financial performance covenants, those with managerial violations actually experience significant cash reductions.","PeriodicalId":170638,"journal":{"name":"Johns Hopkins Carey Business School Research Paper Series","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-01-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130217019","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We develop a discrete-time stochastic volatility option pricing model exploiting the information contained in the Realized Volatility (RV), which is used as a proxy of the unobservable log-return volatility. We model the RV dynamics by a simple and effective long-memory process, whose parameters can be easily estimated using historical data. Assuming an exponentially affine stochastic discount factor, we obtain a fully analytic change of measure. An empirical analysis of Standard and Poor's 500 index options illustrates that our model outperforms competing time-varying and stochastic volatility option pricing models.
{"title":"Realizing Smiles: Options Pricing with Realized Volatility","authors":"Fulvio Corsi, Nicola Fusari, D. La Vecchia","doi":"10.2139/ssrn.1547032","DOIUrl":"https://doi.org/10.2139/ssrn.1547032","url":null,"abstract":"We develop a discrete-time stochastic volatility option pricing model exploiting the information contained in the Realized Volatility (RV), which is used as a proxy of the unobservable log-return volatility. We model the RV dynamics by a simple and effective long-memory process, whose parameters can be easily estimated using historical data. Assuming an exponentially affine stochastic discount factor, we obtain a fully analytic change of measure. An empirical analysis of Standard and Poor's 500 index options illustrates that our model outperforms competing time-varying and stochastic volatility option pricing models.","PeriodicalId":170638,"journal":{"name":"Johns Hopkins Carey Business School Research Paper Series","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-11-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116982673","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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