Miracle-dz/UniFAR-FTUs huggingface dataset:
Has Idiosyncratic Volatility Increased? Not in Recent Times

This study successfully replicates the key findings of Campbell, Lettau, Malkiel, and Xu (2001). We document that aggregate idiosyncratic volatility increases over their sample period from 1962 to 1997. In out-of-sample analysis from 1926 to 1962 and 1998 to 2017, we find that idiosyncratic volatility (IV) decreases, suggesting that their finding is sample-specific. We compare their measure of IV with those obtained from models such as the Fama and French (1993) three-factor model and find that they are very similar. The Campbell et al. (2001) volatility measures can only be estimated at the aggregate level. An advantage of asset pricing model-based IVs is that they can be estimated at the stock level. Employing these stock-level IV measures, we examine trends in a variety of IV series and how IV relates to commonly analyzed firm characteristics. In doing so, we provide further insight into IV and its time-series trends.
Predicting Private Company Failures in Italy Using Financial and Non-Financial Information

The study assesses the use of non-financial information in predicting financial distress in private companies by developing credit risk models tailored to Italian private companies. The in-sample and out-of-sample prediction test results are indicative of the incremental predictive ability of the two new non-financial variables, that is, number of shareholders and number of subsidiaries, over accounting ratios and other widely used non-financial information, including firm age and industry dummies. To be more specific, number of shareholders and number of subsidiaries are negatively associated with private company failures, and the models augmented by the two non-financial variables improve forecasting performance from acceptable discrimination to excellent discrimination over one- to-three year time horizons.
Do Political or Ethnic and Historical Borders Affect Values and Beliefs More? Some Evidence From Central Europe

The paper uses data from the World Values Survey and the European Values Study on individuals in Hungary and its neighbouring countries to examine the effects of political borders on different beliefs, as opposed to that of ethnic differences or historical borders. The focus on Hungary and its neighbours is explained by the fact that parts of the Hungarian ethno-linguistic community can be found in all these countries, which makes it possible to separate the effect of culture from that of the current political community. By applying a cultural gravity model which is concerned with the differences in beliefs between all possible pairs of individuals in the sample, the paper finds that out of five areas of beliefs, it is the beliefs regarding work, markets, and democracy whose differences are robustly affected by political borders, giving some support to the approach which argues that values are shaped through the dialogue occurring within a political community. *
Positioning Risk

Risk profiles of individual assets vary with speculative positioning. hedge fund positions in currency futures strongly predict currency betas: currencies in which speculators hold long positions comove more positively with equity markets. The link emerges after the global financial crisis, when speculators and their intermediary counterparties commonly unwind their positions with equity market shocks. My findings suggest that the scaling of futures positions in response to equity market moves translates directly into an endogenous equity market risk exposure of the currency. Compared to previously studied patterns of endogenous risks and crowded trades, these risk externalities are harder to diversify across asset classes.
The Forced Cancellation of Four Jewel Events Amidst COVID-19 and Its Probable Influence on the Western Cape Economy: a Literature Review

In March 2020, the CoronaVirus Disease 2019 (COVID-19) was identified as a Public Health Emergency. This led to economic disruptions of various countries around the globe either by slowing down or by halting economic activities. These disruptions were induced by measures introduced by world governments such as enforcing prohibitions on travelling (nationally and internationally) and limiting social contact. One industry directly impacted by these imposed measures is that of the Tourism and Events industry, particularly through the forced cancellations and/or postponements of events. In a South African dispensation, the Tourism and Events industry is a major contributor to the national economy and, taking into account the forced cancellations and/or postponements of events, it is highly probable that COVID-19 will have an adverse influence on the South African economy. For this study, the primary objective was to theoretically ascertain the influence of forced cancellations of four jewel events, amidst COVID-19, on the economy of the Western Cape (South Africa). Exploratory research was conducted with a non-empirical approach, while simultaneously utilising a qualitative research methodology. From the research conducted, it appears that the forced cancellations of four jewel events, due to COVID-19, will have dire repercussions on the Western Cape economy.
Accounting Quality and Alliance Contract Provisions

We show that the number of governance provisions imposed on a firm by a strategic alliance partner decreases with the firm's accounting quality. This effect is weaker when the firm has greater bargaining power and stronger when the alliance project is riskier. Moreover, the net benefit to an alliance partner of imposing an additional governance provision on its counterparty apparently increases when the counterparty accounting quality is low, resulting in an enhancement of the partner's market value and a reduction in its bankruptcy risk. Furthermore, alliance partners adopt fewer provisions based on their counterparties' accounting numbers when the counterparties' accounting quality is poor. JEL Classifications: D74; M41.
Credit Supply Shocks and Household Defaults

Are disruptions of the mortgage market a consequence of financial imbalances accumulated in the past? In this paper, we study the effects of positive and negative credit supply (CS) shocks on subsequent household defaults on debt over the last four decades in U.S. states. We apply sign restrictions within a VAR framework to isolate state-level CS shocks, and identify that 1984 and 2004 were the years of systemic, countrywide, positive CS shocks whereas 1989 and 2009 brought systemic negative shocks. Further, by employing a difference-in-differences framework, we find that both positive and negative CS shocks lead to greater household defaults in the future if they also increase mortgage-to-income ratios. We show that the CS shock-induced (i) shifts of employment between the tradable and non-tradable sectors, (ii) changes in household income and (iii) in house prices facilitate the accumulation of default risks. Our results indicate that positive CS shocks occurred in 1984 did not raise household defaults by more in more exposed states compared to less exposed states because the shocks increased both future income and mortgage debt, while not affecting mortgage-to-income ratios. In contrast, the 1989, 2004 and 2009 CS shocks increased mortgage-to-income ratios in subsequent years, thereby raising debt delinquencies and household defaults. These results provide further empirical evidence to theories of endogenous credit cycles.
Bond Risk Premia: The Information in Really Long-Maturity Forward Rates

Long term forward rates contain information that greatly improves the precision with which expectations of future short rates can be distinguished from risk premia in the term structure. Indeed, in affine models, the slope of the term structure of risk premia for long maturities is very closely approximated by the sum of (i) the slope of the forward rate curve and (ii) a term that depends only of yield volatility and maturity ("convexity"), two quantities that can easily be estimated independently of the details of model specification. Key to extracting the risk premium information in long-term forward rates is capturing the dynamics of convexity, which requires a model with time-varying volatility. Using a four-factor ATSM, we find that risk premia on long term bonds are almost entirely driven by volatility. Short rate expectations in our model account for a much larger fraction of the volatility of yields than is typically reported, a result that we show is mainly the result of econometric bias in some estimates of Gaussian models. We also show - using Monte Carlo simulation - that including data on long-term yields in the estimation of term structure models greatly improves the precision of estimated values of short rate expectations, term premia and risk premia. Compared with benchmark estimates that use yield data up to 25 years, excluding data on yields longer than 10 years results in the standard errors of both estimated means and volatilities roughly tripling in size.
Trade and Agglomeration: Theory and Evidence from France

Trade openness leads to aggregate welfare gains, but the local effects of trade vary across space. This paper shows that the welfare gains from trade are lower in smaller cities, due to weaker export-specific agglomeration. Using rich micro data from France, I show that firms’ export-to-sales ratio increases with city size, both within and across industries. I develop an open economy economic geography model with heterogeneous firms to rationalize these novel facts: firms jointly choose their location and export behavior in the presence of sectoral differences in factor intensity and external economies of scale in export costs. Within industries, more productive firms sort into larger cities and into exporting, endogenously benefitting from lower export costs. Across industries, more capital-intensive sectors are endogenously more export intensive and overrepresented in larger cities. To quantify the role of export-specific agglomeration forces, I structurally estimate the model: they can account for 1/3 of the differences in export intensity across locations. As a result, counterfactual trade liberalization induces 17% lower welfare gains in bottom size- compared to top size-quartile locations. These results shed new light on the distributional effects of trade openness and help explain the urban-rural divide over protectionist policies.
Shopping, Hedonism and Timestyle

This paper studies the influence of hedonic gratifications in timestyle, as a mediator variable in 'shopping'. Within the theoretical frame of the timestyle concept, we distinguish the cognitive structure – the meaning of time – and the operative structure – the use of time –. We include empirical evidence regarding the mediator role of the hedonic gratifications obtained by 'shopping' in both structures. The results show that the interpretation of time favors certain gratifications, and so they stimulate the use of shopping time according to certain patterns. The study data are taken from a sample of 289 women aged between 30 and 50 who both work and live in a metropolitan area.
BREXIT: equity market contagion and transmission channels

ABSTRACT This paper investigates the transmission of shocks during the period of the withdrawal of the United Kingdom from the European Union (BREXIT) across twenty-two equity markets. We use an augmented multifactor model to detect the transmission of contagion effects from the United States and Western Europe to Brazil, Russia, India, China and South Africa, commonly known as ‘the BRICS’ countries, during BREXIT, i.e. the exit of Great Britain from the European Union. Our model captures the unexpected returns and disentangles the simple correlations due to fundamentals and contagion. Our results show that crisis did not have the same effects on the BRICS countries in terms of contamination. More precisely, evidence of fundamental contagion is documented between stock markets. Moreover, Russia was the most contaminated market, and China was the least affected market. Furthermore, the findings prove that the stock market contagion between these countries was transmitted by some channels that have been omitted from the theory.
PEAD.txt: Post-Earnings-Announcement Drift Using Text

Abstract We construct a new numerical measure of earnings announcement surprises, standardized unexpected earnings call text (SUE.txt), that does not explicitly incorporate the reported earnings value. SUE.txt generates a text-based post-earnings-announcement drift (PEAD.txt) larger than the classic PEAD. The magnitude of PEAD.txt is considerable even in recent years when the classic PEAD is close to 0. We explore our text-based empirical model to show that the calls’ news content is about details behind the earnings number and the fundamentals of the firm.
Sovereign Investors: Between Global Financial Capitalism and State Capitalism

Sovereign investors are an emerging community of investment organizations, subject to the conflicting demands of international and domestic institutions. Existing research interprets them either as mirroring global financialization or preserving national interests. Both top-down global influences and bottom-up local pressures seem to co-exist, but it is unclear how these organizations manage the conflicts engendered. A path generation perspective applied to the whole community of sovereign investors allows us to capture this nuance. The availability of annual reports and websites published by sovereign investors represent a unique opportunity to analyze how this group responds to these multi-level pressures. Using machine learning to analyze the communication of 57 sovereign investors globally, we propose a new taxonomy of sovereign investors and show the emergence of two main institutional models: the “professional global investor”, supported by democracies and the OECD; and the “user of global finance for domestic development”, which correlates with authoritarian governments and the Middle East. Contrary to studies led contemporary to the global financial crisis, this paper mitigates conclusions that sovereign investors are all heavily influenced by the values and expectations of global financial capitalism. Instead, we show that values related to State Capitalism are gaining legitimacy and being advertised using media traditionally associated with global financial capitalism.
UIP: A Partial Reconciliation from Event Studies

We develop a model where foreign investors in domestic markets react partially to deviations from a UIP condition for long-term bonds. The model predicts that the sign between yield differentials and exchange rate movements is conditional on the source of shocks. Using event studies for identification, we test the model in a sample of 24 developed and emerging economies, finding a UIP-consistent correlation for monetary shocks, but the opposite around episodes of large market uncertainty. The model predicts that exchange rate stabilization policies, prevalent among emerging countries, weaken both correlations, which we confirm in the data.
The Earnings Expectations Game and the Dispersion Anomaly

This study examines the role of differences in firms’ propensity to meet earnings expectations in explaining why firms with high analyst forecast dispersion experience relatively low future stock returns. We first demonstrate that the negative relation between dispersion and returns is concentrated around earnings announcements. Next, we show that this relation disappears when we control for ex ante measures of firms’ propensity to meet earnings expectations and that the component of dispersion explained by these measures drives the return predictability of dispersion. We further demonstrate that firms with low analyst dispersion are substantially more likely to achieve positive earnings surprises and provide new evidence consistent with both expectations management and strategic forecast pessimism explaining this result. Overall, we conclude that investor mispricing of firms’ participation in the earnings-expectations game provides a viable explanation for the dispersion anomaly. This paper was accepted by Brian Bushee, accounting.
Asymmetric information and the securitization of SME loans

Using all loans granted to firms recorded in the Italian credit register, we estimate correlations between risk-transfer and default probabilities to gauge the severity of informational asymmetries in the loan securitization market. First, the analysis confirms the presence of information frictions in the SME loan securitisation market. Second, the unconditional quality of securitized loans remains significantly better than that of non-securitized ones, in line with the notion that markets anticipate the presence of information frictions and lead to a selection of loans which offsets the detrimental effects of asymmetric information. Third, using data for firms that maintain multiple bank relationships, we obtain indications of the relative importance played by two forms of information friction, adverse selection and moral hazard. While the former is widespread, the latter is present in weak relationships only, in line with the notion that such loans are characterised by a limited commitment to exert costly monitoring by the bank.
CEO Attributes, Sustainable Performance, Environmental Performance, and Environmental Reporting: New Insights from Upper Echelons Perspective

This study examines the impact of CEO attributes on sustainable performance, environmental performance and environmental reporting, which are motivated by institutionally-driven environmental policies, regulations, and management in the context of Chinese listed firms. Using a comprehensive dataset of 2,854 Chinese listed firms over the 2010-2017 period (i.e., making over 16,000 individual firm-year observations), our findings are four-fold. First, our overall findings reveal that CEOs with research background tend to engage more in activities that improve sustainable performance, environmental performance, and environmental reporting compared with those that are not. Second, CEOs with financial expertise are positively linked with increased sustainable performance and environmental reporting. Third, CEOs with foreign exposure are more eager to engage in activities that enhance sustainable and environmental performance than those that are not. Fourth, young CEOs tend to take actions that reduce both sustainable and environmental performance than their older counterparts. We interpret our results within upper echelons theoretical perspective. The results are robust to alternative measures, potential endogeneities and sample selection problems.
If You Want to Maximize Profits, Manage for the Long-Term

We exploit a quasi-natural experiment and study whether the staggered enactment of constituency statutes in different U.S. states can encourage firms to manage for the long-term. Using an extended set of measures to describe the “length” of a firm’s horizon, we find that after the enactment of constituency statutes, executive compensation contracts have longer vesting periods, the shareholder composition changes towards greater institutional ownership with longer-term horizons, employee turnover is lower, firms manage earnings less and conduct fewer share repurchases, and firms extend more trade credit that reflects longer-term relationships with their customers. We further show this long-termism matters for firm performance, as it improves profitability. In additional tests, we find that results are more pronounced for firms with a greater amount of intangible assets and for whom a longer-term orientation matters most.
Uncertainty, Sentiments and Time-Varying Risk Premia

Why are stock prices much more volatile than the underlying dividends? The excess volatility of prices can in principle be attributed to two different causes: time-varying discount rates for expected future dividends, arising from variation in risk premia; or the irrational exuberance of investors, bidding prices up and down even in the absence of changes in the underlying value of the asset. No consensus has so far emerged among economists as to the prevalence of one or the other source of price variation. I propose in this paper a novel way to approach this problem, by identifying changes in the uncertainty faced by investors regarding the fundamental value of an asset and exploiting the different response in prices that such changes in uncertainty would generate through sentiments or risk premia. I then apply this framework to the S&P 500 index from 1872 till 2019: the positive correlation found between movements in uncertainty and in prices (or, equivalently, the negative correlation between movements in uncertainty and in implied risk premia) is not compatible with rational investors' behavior and suggests instead the presence of a significant sentiments component in stock prices.
Ethiopia’s Flagship Public Works Program Increases Tree Cover in Rural Areas and Sloped Terrains

More than one billion people worldwide receive cash or in-kind transfers from social assistance programs. In low-income countries, these transfers are often being conditioned on participation in labor-intensive public works to rehabilitate local infrastructure or natural resources. Despite their popularity, the environmental impacts of public works programs remain largely undocumented, implying that researchers and policymakers may be underestimating their social impacts. We assess the environmental impacts of public works within Ethiopia’s Productive Safety Net Program (PSNP), one of the largest and longest- running public works programs in the world. As many of the PSNP public works are forestry projects, we focus on quantifying the impact of the PSNP on the percentage of tree cover in local communities. Using satellite-based measures of tree cover, we combine difference-in- differences and inverse probability treatment weighting methodologies to identify the causal impacts of the PSNP on tree cover. We find that the PSNP increased tree cover by 3.8% and that these increases in tree cover are larger in less densely populated areas and on steep- sloped terrains that are poorly suited for crop agriculture. As trees sequester carbon and increasing tree cover is considered an important strategy to limit global warming, our results suggest an important win-win potential for social safety net programs with an environmental component.
Intra-Firm Hierarchies and Gender Gaps

Abstract We study how changes in female representation at the top of a firm’s organisation affect gender-specific outcomes across hierarchies within firms. We start by developing a theoretical model of a hierarchical firm, where gender representation in top organisational layers can affect gender-specific hiring and promotion probabilities at lower layers. We then exploit a recent French reform that imposed gender representation quotas in the boards of directors and test the model’s predictions in the data. Our empirical results show that the reform was successful in reducing gender wage and representation gaps at the upper layers of the firm, but not at lower firm layers. A Panel VAR analysis confirms that the trickle-down effects of this policy were limited and suggests that quotas targeting middle management, rather than corporate boards, may have a more widespread effect across the firm.