This paper challenges the view that alternative consumption measures (e.g., garbage, fourth quarter, unfiltered consumption) can address the empirical shortcomings of consumption-based asset pricing. Instead, we show that testing alternative consumption processes is a triple hypothesis problem, which, in addition to finding the most accurate consumption measure, requires specifying and estimating the dynamics of consumption growth and testing the functional form of investor preferences. The existing literature tends to make strong assumptions on consumption dynamics (i.i.d.) and investor preferences (CRRA). We show that relaxing these assumptions leads to different results regarding the fit and preference parameters of the various consumption measures.
{"title":"Asset Pricing With and Without Garbage: Testability of Consumption-based Models","authors":"Stefanos Delikouras, George M. Korniotis","doi":"10.2139/ssrn.3417217","DOIUrl":"https://doi.org/10.2139/ssrn.3417217","url":null,"abstract":"This paper challenges the view that alternative consumption measures (e.g., garbage, fourth quarter, unfiltered consumption) can address the empirical shortcomings of consumption-based asset pricing. Instead, we show that testing alternative consumption processes is a triple hypothesis problem, which, in addition to finding the most accurate consumption measure, requires specifying and estimating the dynamics of consumption growth and testing the functional form of investor preferences. The existing literature tends to make strong assumptions on consumption dynamics (i.i.d.) and investor preferences (CRRA). We show that relaxing these assumptions leads to different results regarding the fit and preference parameters of the various consumption measures.","PeriodicalId":202253,"journal":{"name":"University of Miami Herbert Business School Research Paper Series","volume":"36 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115404920","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 determinants and consequences of virtual shareholder meetings (VSMs) using a sample of voluntary (precoronavirus disease 2019) and forced (i.e., because of coronavirus disease 2019) VSM adopters. Voluntary adopters are tech firms and firms traditionally more engaged with shareholders, consistent with the stated objective to increase shareholder participation. In contrast, we do not find that firms choose the virtual format to avoid shareholders’ scrutiny. Textual analysis of transcripts suggests that in VSMs, business presentations by management are less frequent, shorter, and more generic but only among voluntary adopters, suggesting that these properties reflect a firm’s choice rather than are a by-product of the virtual format per se. VSMs are more likely to exhibit no questions during the question and answer period, but conditioned upon having one question, they exhibit the same number of questions; such questions are more negative in tone, inconsistent with managers using the virtual format to filter out hostile questions. Finally, there is some evidence of greater abnormal absolute returns around VSMs, supporting the notion that greater attendance translates into greater information content. Overall, VSMs exhibit less activity on average, consistent with critics’ concerns, but such reduced activity does not appear to cause a loss in information content nor does it appear to reflect an attempt to avoid scrutiny. This paper was accepted by Suraj Srinivasan, accounting. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2023.4946 .
{"title":"Virtual Shareholder Meetings","authors":"François Brochet, Roman Chychyla, F. Ferri","doi":"10.2139/ssrn.3743064","DOIUrl":"https://doi.org/10.2139/ssrn.3743064","url":null,"abstract":"We examine determinants and consequences of virtual shareholder meetings (VSMs) using a sample of voluntary (precoronavirus disease 2019) and forced (i.e., because of coronavirus disease 2019) VSM adopters. Voluntary adopters are tech firms and firms traditionally more engaged with shareholders, consistent with the stated objective to increase shareholder participation. In contrast, we do not find that firms choose the virtual format to avoid shareholders’ scrutiny. Textual analysis of transcripts suggests that in VSMs, business presentations by management are less frequent, shorter, and more generic but only among voluntary adopters, suggesting that these properties reflect a firm’s choice rather than are a by-product of the virtual format per se. VSMs are more likely to exhibit no questions during the question and answer period, but conditioned upon having one question, they exhibit the same number of questions; such questions are more negative in tone, inconsistent with managers using the virtual format to filter out hostile questions. Finally, there is some evidence of greater abnormal absolute returns around VSMs, supporting the notion that greater attendance translates into greater information content. Overall, VSMs exhibit less activity on average, consistent with critics’ concerns, but such reduced activity does not appear to cause a loss in information content nor does it appear to reflect an attempt to avoid scrutiny. This paper was accepted by Suraj Srinivasan, accounting. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2023.4946 .","PeriodicalId":202253,"journal":{"name":"University of Miami Herbert Business School Research Paper Series","volume":"29 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125947988","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}
Vidhi Chhaochharia, Mengqiao Du, Alexandra Niessen-Ruenzi
This paper examines the impact of counter-stereotypical female role models on women's labor supply and occupational choices. Using hand-collected data from Gallup surveys that cover a long time series, we create a direct measure of counter-stereotypical female role models based on the fraction of local survey respondents who admire famous women in business, politics, or science. We show that the presence of counter-stereotypical female role models is associated with more women participating in the labor market, working in male-dominated industries, choosing occupations with abstract tasks, and taking managerial positions, which eventually alleviates the gender pay gap.
{"title":"Do Counter-Stereotypical Female Role Models Impact Women's Occupational Choices?","authors":"Vidhi Chhaochharia, Mengqiao Du, Alexandra Niessen-Ruenzi","doi":"10.2139/ssrn.3796264","DOIUrl":"https://doi.org/10.2139/ssrn.3796264","url":null,"abstract":"This paper examines the impact of counter-stereotypical female role models on women's labor supply and occupational choices. Using hand-collected data from Gallup surveys that cover a long time series, we create a direct measure of counter-stereotypical female role models based on the fraction of local survey respondents who admire famous women in business, politics, or science. We show that the presence of counter-stereotypical female role models is associated with more women participating in the labor market, working in male-dominated industries, choosing occupations with abstract tasks, and taking managerial positions, which eventually alleviates the gender pay gap.","PeriodicalId":202253,"journal":{"name":"University of Miami Herbert Business School Research Paper Series","volume":"16 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-03-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127886784","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 whether the distribution of trades along the set of strike prices of option contracts on the same stock contains information about underlying price discovery. We show that option traders' demand for delta exposure drives the volume-weighted average strike-spot price ratio (VWKS). In turn, we find that VWKS predicts underlying returns and anticipates the flow of fundamental information about the stock. The return predictability is greater but not limited to stocks with higher information asymmetries and arbitrage costs, and becomes stronger ahead of value relevant news. Overall, options trading appears to play an important informational role for underlying markets.
{"title":"Center of Volume Mass: Does Options Trading Predict Stock Returns?","authors":"Gennaro Bernile, Fei Gao, Jianfeng Hu","doi":"10.2139/ssrn.3505045","DOIUrl":"https://doi.org/10.2139/ssrn.3505045","url":null,"abstract":"We examine whether the distribution of trades along the set of strike prices of option contracts on the same stock contains information about underlying price discovery. We show that option traders' demand for delta exposure drives the volume-weighted average strike-spot price ratio (VWKS). In turn, we find that VWKS predicts underlying returns and anticipates the flow of fundamental information about the stock. The return predictability is greater but not limited to stocks with higher information asymmetries and arbitrage costs, and becomes stronger ahead of value relevant news. Overall, options trading appears to play an important informational role for underlying markets.","PeriodicalId":202253,"journal":{"name":"University of Miami Herbert Business School Research Paper Series","volume":"53 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121955833","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}
Jawad M. Addoum, Stefanos Delikouras, Da Ke, Alok Kumar
This study examines whether momentum in stock prices is induced by changes in the political environment. We find that momentum profits are concentrated among politically sensitive firms and industries. During the 1939 to 2016 period, a trading strategy with a long position in winner portfolios (industries or firms) that are politically unfavored and a short position in losers that are politically favored eliminates all momentum profits. Further, our political sensitivity based factor (POL) explains 23-27% (42-43%) of monthly stock (industry) momentum alphas, and generates large increases in time-series R-squared for the momentum factor. This incremental explanatory power is especially strong around presidential elections, when the level of political activity is high. Collectively, our results suggest that investor underreaction to political information generates momentum in stock and industry returns.
{"title":"Under-Reaction to Political Information and Price Momentum","authors":"Jawad M. Addoum, Stefanos Delikouras, Da Ke, Alok Kumar","doi":"10.2139/ssrn.2425204","DOIUrl":"https://doi.org/10.2139/ssrn.2425204","url":null,"abstract":"This study examines whether momentum in stock prices is induced by changes in the political environment. We find that momentum profits are concentrated among politically sensitive firms and industries. During the 1939 to 2016 period, a trading strategy with a long position in winner portfolios (industries or firms) that are politically unfavored and a short position in losers that are politically favored eliminates all momentum profits. Further, our political sensitivity based factor (POL) explains 23-27% (42-43%) of monthly stock (industry) momentum alphas, and generates large increases in time-series R-squared for the momentum factor. This incremental explanatory power is especially strong around presidential elections, when the level of political activity is high. Collectively, our results suggest that investor underreaction to political information generates momentum in stock and industry returns.","PeriodicalId":202253,"journal":{"name":"University of Miami Herbert Business School Research Paper Series","volume":"389 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-06-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122780357","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}
ABSTRACT Accounting studies often encounter observations with extreme values that can influence coefficient estimates and inferences. Two widely used approaches to address influential observations ...
{"title":"Influential Observations and Inference in Accounting Research","authors":"A. Leone, Miguel Minutti-Meza, Charles E. Wasley","doi":"10.2139/ssrn.2407967","DOIUrl":"https://doi.org/10.2139/ssrn.2407967","url":null,"abstract":"ABSTRACT Accounting studies often encounter observations with extreme values that can influence coefficient estimates and inferences. Two widely used approaches to address influential observations ...","PeriodicalId":202253,"journal":{"name":"University of Miami Herbert Business School Research Paper Series","volume":"37 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-08-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115530295","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 extend previous studies on the effect of non-marketability on stock prices, and examine a very unique short-lived repeating non-marketability that lasts for only less than one day in China. Using the equity call warrants that are not subject to this trading constraint as a control, we provide evidence that such a one-day trading lockup prices a stock at a discount to the stock value implied from the warrants. We further show that the discount decreases throughout the trading day and that investors tend to purchase more stocks when the one-day trading lockup becomes less binding toward the market close. The findings suggest that, in line with the liquidity-based asset pricing theories, one channel through which the non-marketability constraint causes the price discount is that the restriction on asset liquidity or marketability may adversely affect investor demand, thus lowering the equilibrium price.
{"title":"Non-Marketability and One-Day Selling Lockup","authors":"Jiangze Bian, Tie Su, Jun Wang","doi":"10.2139/ssrn.2563312","DOIUrl":"https://doi.org/10.2139/ssrn.2563312","url":null,"abstract":"We extend previous studies on the effect of non-marketability on stock prices, and examine a very unique short-lived repeating non-marketability that lasts for only less than one day in China. Using the equity call warrants that are not subject to this trading constraint as a control, we provide evidence that such a one-day trading lockup prices a stock at a discount to the stock value implied from the warrants. We further show that the discount decreases throughout the trading day and that investors tend to purchase more stocks when the one-day trading lockup becomes less binding toward the market close. The findings suggest that, in line with the liquidity-based asset pricing theories, one channel through which the non-marketability constraint causes the price discount is that the restriction on asset liquidity or marketability may adversely affect investor demand, thus lowering the equilibrium price.","PeriodicalId":202253,"journal":{"name":"University of Miami Herbert Business School Research Paper Series","volume":"45 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130405871","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}
This paper investigates the determinants of credit risk in insurance companies in the U.S. and Europe. Consistent with recent results for non-financial firms in the U.S., we find that equity volatility is a major determinant and predictor of CDS spreads for both U.S. and European insurers, even after controlling for the composition of their investment portfolios and other firm-specific characteristics such as leverage and macro controls. Furthermore, we find macroeconomic factors to affect the credit risk of European but not U.S. insurers, whereas cash holdings seem to be relevant in explaining the credit spreads of U.S. insurance companies. We find that cash holdings and credit spreads of U.S. insurers are positively correlated. However, the availability of cash reduces the credit risk of firms experiencing positive solvency shocks. Overall, our results are economically significant and suggest that equity and credit markets incorporate quickly relevant information on the creditworthiness of large insurers.
{"title":"Credit Risk Determinants of Insurance Companies","authors":"L. González, Lorenzo Naranjo","doi":"10.2139/ssrn.2325457","DOIUrl":"https://doi.org/10.2139/ssrn.2325457","url":null,"abstract":"This paper investigates the determinants of credit risk in insurance companies in the U.S. and Europe. Consistent with recent results for non-financial firms in the U.S., we find that equity volatility is a major determinant and predictor of CDS spreads for both U.S. and European insurers, even after controlling for the composition of their investment portfolios and other firm-specific characteristics such as leverage and macro controls. Furthermore, we find macroeconomic factors to affect the credit risk of European but not U.S. insurers, whereas cash holdings seem to be relevant in explaining the credit spreads of U.S. insurance companies. We find that cash holdings and credit spreads of U.S. insurers are positively correlated. However, the availability of cash reduces the credit risk of firms experiencing positive solvency shocks. Overall, our results are economically significant and suggest that equity and credit markets incorporate quickly relevant information on the creditworthiness of large insurers.","PeriodicalId":202253,"journal":{"name":"University of Miami Herbert Business School Research Paper Series","volume":"44 176 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-03-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125946785","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}
Customized temporal discounts are price cuts or coupons that are tailored by size, timing, and household to maximize profits to a retailer or manufacturer. The authors show how such discounts allow companies to optimize to whom, when, and how much to discount. Such a scheme allows firms to send just enough discounts just prior to the individual's purchase of a rival brand. To do so, the authors model household purchase timing and brand choice in response to discounts and use Bayesian estimation to obtain individual household parameters. They illustrate the model on a Japanese data set having price cuts, a US data set having coupons, and another US data set having discounts. They formulate the optimization task of customized temporal coupons as a constrained multiple-knapsack problem under a given budget. They use simulations of the empirical contexts to obtain optimal solutions and to assess improvement in profits relative to existing practice and alternate models in the literature. The proposed model yields increase in profits of 18–40 percent relative to a standard model that optimizes the value but not timing of discounts.
{"title":"To Whom, When, and How Much to Discount? A Constrained Optimization of Customized Temporal Discounts","authors":"Joseph M. Johnson, G. Tellis, Eddie Ip","doi":"10.2139/ssrn.2332270","DOIUrl":"https://doi.org/10.2139/ssrn.2332270","url":null,"abstract":"Customized temporal discounts are price cuts or coupons that are tailored by size, timing, and household to maximize profits to a retailer or manufacturer. The authors show how such discounts allow companies to optimize to whom, when, and how much to discount. Such a scheme allows firms to send just enough discounts just prior to the individual's purchase of a rival brand. To do so, the authors model household purchase timing and brand choice in response to discounts and use Bayesian estimation to obtain individual household parameters. They illustrate the model on a Japanese data set having price cuts, a US data set having coupons, and another US data set having discounts. They formulate the optimization task of customized temporal coupons as a constrained multiple-knapsack problem under a given budget. They use simulations of the empirical contexts to obtain optimal solutions and to assess improvement in profits relative to existing practice and alternate models in the literature. The proposed model yields increase in profits of 18–40 percent relative to a standard model that optimizes the value but not timing of discounts.","PeriodicalId":202253,"journal":{"name":"University of Miami Herbert Business School Research Paper Series","volume":"42 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-09-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128965026","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}
This paper examines the role of institutional trading during the option backdating scandal of 2006–2007. Unlike their inability to anticipate other corporate events, institutional investors as a group display negative abnormal trading imbalances (i.e., buy minus sell volumes) in anticipation of firm-specific backdating exposures. Consistent with informed trading, the underlying trades earn positive abnormal short- and long-term profits. Moreover, the negative abnormal imbalances are larger in magnitude when backdating is likely a more severe issue. Local institutions, in particular, display negative trading imbalances earlier in event-time and earn consistently higher trading profits than non-local institutions. Although we find some evidence of over-reaction following the arrival of information about the backdating scandal, these patterns are short-lived and exclusively due to the activity of non-local institutions. Overall, institutional investors behave as informed investors, particularly in local stocks, during this prolonged period of heightened uncertainty about corporate reporting and governance practices.
{"title":"Institutional Trading during a Wave of Corporate Scandals: 'Perfect Payday'?","authors":"Gennaro Bernile, Johan Sulaeman, Qin Emma Wang","doi":"10.2139/ssrn.2159779","DOIUrl":"https://doi.org/10.2139/ssrn.2159779","url":null,"abstract":"This paper examines the role of institutional trading during the option backdating scandal of 2006–2007. Unlike their inability to anticipate other corporate events, institutional investors as a group display negative abnormal trading imbalances (i.e., buy minus sell volumes) in anticipation of firm-specific backdating exposures. Consistent with informed trading, the underlying trades earn positive abnormal short- and long-term profits. Moreover, the negative abnormal imbalances are larger in magnitude when backdating is likely a more severe issue. Local institutions, in particular, display negative trading imbalances earlier in event-time and earn consistently higher trading profits than non-local institutions. Although we find some evidence of over-reaction following the arrival of information about the backdating scandal, these patterns are short-lived and exclusively due to the activity of non-local institutions. Overall, institutional investors behave as informed investors, particularly in local stocks, during this prolonged period of heightened uncertainty about corporate reporting and governance practices.","PeriodicalId":202253,"journal":{"name":"University of Miami Herbert Business School Research Paper Series","volume":"49 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115880120","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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