Miracle-dz/UniFAR-FTUs huggingface dataset:
Convex Combinations in Judgment Aggregation

Judgments are the basis for almost all decisions. They often come from different models and multiple experts. This information is typically aggregated using simple averages, which leads to the well-known shared information problem. A weighted average of the individual judgments based on empirically estimated sophisticated weights is commonly discarded in practice, because the sophisticated weights have large estimation errors. In this paper, we explore mixture weights, which are convex combinations of sophisticated and naive weights. We show analytically that if the data generation process is stable, there always exists a mixture weight which aggregates judgments better than the naive weights. We thus offer a path to alleviate the shared information problem. In contrast to other proposed solutions, we do not require any control over the judgment process. We demonstrate the utility of mixture weights in numerical analyses and in two empirical applications. We also offer heuristic selection algorithms for the correct mixture weight and analyze them in our numerical and empirical settings.
Risks in Mergers and Acquisitions

Using acquirer’s risk-factor disclosure in merger filings, we study the risks faced by acquirers in mergers and acquisitions and how these risks are associated with important merger outcomes. We first establish the validity of acquirer’s risk factor disclosure, and then employ an unsupervised topic modeling approach to divide acquirer’s disclosures into specific risk topics. We find that acquirers emphasize four risks including technology and product, valuation and fairness, accounting information, and ownership and dilution. Our further analyses show that these disclosed risks have significant and diverging relations with acquirer’s post-merger outcomes such as post-merger integration problem and volatility and level of post-merger of operating and stock performance.
Option Price Implied Information and REIT Returns

Option-based measures can predict underlying stock returns, due to differences in price discovery and price pressure effects between options and underlying stocks. We investigate stock return predictability by various option price-based measures using REITs. REITs are more transparent and efficiently priced than general stocks, but REIT options are less liquid. Consistent with the model of Easley, O’Hara, and Srinivas (1998), most of the option price-based measures do not significantly forecast REIT stock returns, but changes in option implied volatilities are robust and significant return predictors. We provide further evidence supporting the informed trading channel instead of the price pressure effects.
Monetary Surprises, Debt Structure and Credit Misallocation

I find that, unexpected monetary tightening predicts a contraction in aggregate corporate bonds but an expansion in bank credit, in contrast to conventional wisdom. Using micro-data, I argue that, large, high rated firms with unused credit line rebalance towards bank loans and away from corporate bonds as the relative spread of bond over loan increases. This drives the aggregate evidence. I explain these facts in a heterogeneous agents New Keynesian model by making bank loans safer (collateralized) than defaultable bonds but issued at a greater intermediation cost. An interest rate hike raises default risk and hence the cost of bond financing. Substitution takes place within large, unconstrained firms, while constrained firms tend to issue more equity. My results imply that bank credit is "misallocated" from constrained productive to unconstrained firms. Additionally, debt composition drives firms' differential investment sensitivities to interest rate risk, where firms with higher loan share are more responsive.
The Impact of Sharing Economy: New Evidence from Airbnb in Taiwan

We investigate the impact of Airbnb on incumbent hotels' revenue in Taiwan. Combining listing information scraped from Airbnb website with a panel of hotel revenues, we propose a novel set of instrumental variables to identify the casual impact. Relative to OLS estimate, IV-2SLS estimates indicate larger negative effects from Airbnb. Furthermore, smaller and lower quality hotels are heavily affected by Airbnb listings.
What Do Outside CEOs Really Do? A Look Inside the Black Box With Plant-Level Data

Using rich plant-level data, we analyze the relative performance of inside and outside CEOs and provide the first empirical evidence on what CEOs actually do to improve performance. Contrary to conventional wisdom, we show that, compared to insiders, outsiders achieve higher growth in productivity in both lowand high-performing firms. Efficiency gains emerge from divesting lowperforming, non-core, and low-tech plants. Additionally, outsiders improve the productivity of remaining plants by cutting costs, consolidating product offering, adopting newer technology, and shifting to more capital-intensive production that improves labor productivity. Overall, our results suggest that outsiders are more effective in rectifying pre-turnover inefficiencies.
Cross-Border Spillover Effects of Macroprudential Policies: A Conceptual Framework

Due to the international dimension of the financial sector within the EU and beyond, domestically oriented macroprudential policies have the potential to create material cross-border spillover effects. This occasional paper provides a detailed overview of the academic and empirical literature on cross-border effects of macroprudential policies. It also summarises a stocktaking exercise, conducted by a task force of the ESCB’s Financial Stability Committee (FSC), on existing national approaches within the EU for assessing and monitoring such cross-border spillover effects. The paper accompanies an FSC report presenting a framework to be used by macroprudential authorities when assessing cross-border spillover effects induced by enacted or planned policy measures. JEL Classification: E42, E58, F36, G21
The impact of debt covenants on earnings announcement returns

ABSTRACT We study the impact of debt covenants on earnings announcement returns, using event-study methodology, by creating 10 covenant groups and a covenant index. We find that during bad news, whether it stems from a bad earnings surprise based on analyst forecasts or a negative average market reaction, both the index and most covenant groups display a significantly negative impact on announcement returns. For good news, particularly when the market reaction is positive on average, we also observe a significantly positive effect from some covenant groups, but not the index. The strongest impact on returns comes mostly from debt-related covenants such as leverage tests, cross-default clause and debt issue restrictions. Finally, we also show that regardless of firm characteristics, risk measures or exposure to information asymmetry, most covenants have a negative impact on announcement returns for all firms when the news is bad. For the full sample and the good news subsample, however, we find that small, risky firms with high information asymmetry issues are rewarded by the market and vice versa.
Customer Concentration and M&A Performance

Abstract This paper examines how the target's customer concentration affects merger performance. We find that the acquirer purchasing a customer-concentrated firm experiences significantly lower stock market returns and worse long-run operating performance. The effect is more pronounced when customers face lower switching costs or the target undertakes a higher level of relationship-specific investments, exhibits higher cash volatility, or is acquired by a less well-known company. Further analysis shows that the negative association is mainly driven by corporate customers, while relatively safe government customers moderate the effect. We also find that shared major customers, overconfident CEOs, and poor corporate governance are more likely to increase the likelihood of customer-concentrated acquisitions. Overall, our findings suggest that higher customer concentration leads to lower value creation in mergers.
Insider Trading Around Dividend Announcements: The Spanish Evidence

We analyze the relationship between dividends and insiders' transactions in an attempt to determine whether insider trading modifies the interpretation of any signal sent by the increase/decrease in dividend payments. The aim is to determine whether insider transactions are as good signal as dividend payments could be. Notice that traditionally an increase/decrease in dividend payments are considered by the market as good/bad news about the future perspective of a firm. Equally, several authors have analyzed the transactions by insiders as signals of a firm's health. For this reason, it could be plausible to consider the joint effect of both signals, dividend payments and insider transactions. Our paper evidences that the market reacts positively (negatively) to increase in dividends when they are accompanied of insiders' purchases (sales), corroborating previous Anglo-Saxon literature.
Do Dual Discounting Equations Reconcile Exponential Banks with Their Hyperbolic Customers?

There is an apparent rift between the way banks calculate and the way humans think. <br><br>On the one hand, exponential discounting has played a centuries-long, lead role in financial analysis. On the other hand, experiments by behavioral economists demonstrate that hyperbolic discounting is better than exponential at explaining human inter-temporal behavior. The result is scope for misunderstanding between financial institutions and their customers because many financial products involve calculations alien to consumer thinking. Calls for improving consumer financial literacy are symptoms of this disconnect. <br><br>This article queries past experimental results by examining the underlying theory using the concept of duality. Two dual expressions are derived: one expression is dual to the exponential discounting equation and the other is dual to the hyperbolic. Each dual contains the full array of interest rates implied by every root solving its source equation. An array includes the negative and complex-valued interest rates ignored for centuries on the grounds that they lack economic meaning. Recent research, however, demonstrates that an array of rates does possess economic meaning. This finding legitimizes the duals, removing a barrier to their inclusion in financial analysis. <br><br>Duality offers possible reconciliation between the two approaches to discounting. The two dual expressions display a similarity and a difference. The similarity is in their structure, implying the two approaches to discounting are not as different as experimentalists suppose. The difference is in their components, this difference suggesting new experiments that may support or deny the proposed reconciliation. <br><br>Dual equations also suggest policy advice.
Corporate ethics programs: Reducing risks or wasting money? – Insights from the investors’ perspective

Is there an association between a firm's corporate ethics program (CEP) and investors' assessments of firm risk? Which particular factors of a firm's CEP drive this relationship? We explore these questions by examining the CEPs of 150 publicly listed German firms from 2014 to 2018. To do so, we create a CEP index by aggregating 24 clearly identifiable items - based on publicly available corporate reports - and make three main contributions: i) The detailed descriptive statistics of the developed index allow managers to benchmark their firms' CEPs. ii) We find that a higher CEP index reduces downside equity risk but increases credit risk. This indicates that the decreased likelihood of extreme losses but increased day-to-day costs that result from a relatively comprehensive CEP benefit equity investors at the expense of debt investors. iii) Based on a factor analysis, we observe that internally institutionalized CEP items drive this equity risk-reducing effect, while credit risk only decreases via external auditors' involvement. Supplemental analyses demonstrate that investors suspect that soft CEP items are pure lip service, as there is no strong relation between these items and risk. Moreover, the implementation of additional CEP items is shown to be particularly beneficial for firms that already have comprehensive CEPs in place. Finally, we observe some indication that the equity risk-decreasing effect outweighs the debt risk-increasing effect.
Quid Pro Quo in IPO Auctions

Is there quid pro quo in auctioned IPOs - an alternative to bookbuilding in U.S. and elsewhere? Using proprietary data on uniform-pricing IPO auctions from China, we show when the share allocation rule shifted from pro rata to lottery draw (that makes quid pro quo valuable to a bidder), fund families having pre-shift stronger commission ties with the underwriter submit bids later, place more strategic and accurate bids, have more bids qualified for the allocation round, and are more likely to receive share allocation than other fund families. The evidence supports quid pro quo facilitated by the underwriter’s leakage of privileged bidding information.
Some Technical Analysis on the Stock Market: Spain and USA

The model of Technical Analysis goes against the fulfillment of the weak form of the Hypothesis of Efficient Market raised by Fama (1970). Nevertheless, recently some studies provide evidence with probable prediction of the expected returns based on the past returns. In particular, the investigation of Brock, Lakonishok, and LeBaron (1992) is important because it is one of the few academic investigations that have been able to document a strategy of successful investment based on the Technical Analysis. In the present investigation: The continuation of the past returns in the short term is confirmed. This continuation stays strong statistically at least until the last twelve months, but it is losing force as the terms increase. To the 36 months, certain evidence would exist towards a reversion to the average, but in any case this is extremely weak from a statistical point of view. With respect to the indicators of Technical Analysis, positive but smaller returns compared to those of the indexing are generated. This is due to the incapacity of the Technical Analysis to generate satisfactory results in periods of declining stock markets. More even, the problem of the greater costs of transaction due to the high number of transactions made exists. Therefore, it is not conclusive that the Technical Analysis generates better results than a simple strategy of "to buy and to maintain". Thus, the investor would be better indexing his portfolio than following the strategies raised by the Technical Analysis.
Do Investor Sophistication and Trading Experience Eliminate Behavioral Biases in Financial Markets?

This paper provides an in depth analysis of an investor's reluctance to realize losses and his propensity to realize gains - a behavior known as the disposition effect. Together, sophistication (static differences across investors) and trading experience (evolving behavior of a single investor) eliminate the reluctance to realize losses. However, an asymmetry exists as sophistication and trading experience reduce the propensity to realize gains by 37% (but fail to eliminate this part of the behavior.) Our research design allows us to follow an individual's behavior from the start of his investing life/career. This ability makes it possible to track the evolution of the disposition effect as it is reduced and/or disappears. Our results are robust to alternative explanations including feedback trading, calendar effects, and frequency of observation.
Media Sentiment on Monetary Policy: Determinants and Relevance for Inflation Expectations

We construct a new indicator to capture media sentiment about the European Central Bank monetary policy and its relevant environment by analyzing 25,000 articles from five major international newspapers. Using named entity recognition and part-of-speech tagging, we propose a methodology to dissociate the dissemination of the central bank's official communications from the media comments. The resulting -daily- index correlates with some -monthly- standard measures of economic sentiment but reveals idiosyncratic information on monetary policy. Analyzing the determinants of our index, we find that both press conference and inter-meeting communications of the president significantly affect media sentiment. We then show that, controlling for a large range of factors, daily changes in media sentiment have predictive power on financial markets’ inflation expectations.
Emerging Equity Market Comovements: Trends and Macro-Economic Fundamentals

Emerging equity markets have become increasingly interrelated over the past two decades. For a sample of 32 emerging markets from four different regions we find significant positive time trends in cross-country correlations within regions, correlations across regions and in comovements with the rest of the world. Furthermore, we examine the economic mechanisms that drive these trends. We find that official market liberalization, a continuous measure of equity market openness, equity market development, and to some extent, trade openness all play a role. However, we show important heterogeneity across regions, both in the speed at which comovements increase over time and in the underlying macro-economic channels.
Can Retail Investors Learn from Insiders?

This paper examines the trading patterns of retail investors following insider trading and the corresponding price impact. Retail investors follow the opportunistic purchases by insiders, but not their routine purchases. The abnormal retail downloads of the Form 4 filings from the EDGAR database also increase for opportunistic insider purchases. Neither investor attention nor common information such as earnings announcements or analysts forecast revisions explains the results. Moreover, for stocks with opportunistic insider purchases, those that retail investors bought yield higher cumulative abnormal returns than those that retail investors sold. The effect is mostly driven by the information component of the retail trades, rather than liquidity provision or temporary price pressure, and stronger for stocks with greater informational uncertainty and higher arbitrage costs. Variance ratio tests also suggest price efficiency improvements for stocks bought by retail investors following opportunistic insider purchases. The evidence is mostly consistent with retail investors learning from opportunistic insider purchases, and their trading helping expedite price discovery.
Actual Share Repurchases and Corporate Liquidity

Research into the impact of open market share repurchases has been hindered by the lack of data available on actual share repurchases in many countries, including the U.S. Using a previously unaccessed database containing detailed information on 36,848 repurchase days concerning 352 French firms, we show that corporate share repurchases have a significantly adverse effect on the liquidity of the trading day concerned, whether measured by bid-ask spread or depth. Our results also indicate that although on average managers have some timing ability, only the smallest firms listed on the least liquid market segments successfully take advantage of it.
A Horse Race of Preferences for Predicting Portfolio Choice

We conduct a horse race of preferences to compare the predictive power and net effects of 15 types of preferences, such as attention, ambiguity aversion, loss aversion, probability overweighting, time preference, confidence, self-control, trust, and strategic reasoning, on actual investment decisions and outcomes. We estimate the net effects of the preferences by considering the correlations between the preferences. We find that for share of wealth invested in the stock market, the effect of confidence (Kyle and Wang, 1997) is stronger than that of risk aversion, which is stronger than the effects of self-control (Heidhues and Koszegi, 2010), loss aversion (Tversky and Kahneman, 1992), and ambiguity aversion (Dow and Werlang, 1992). For holding lottery-like stock, the effect of attention (Sims, 2003) is stronger than that of the discount rate, which is stronger than that of probability overweighting (Barberis and Huang, 2008). For share of lottery-like stock, the effect of strategic reasoning (Nagel, 1995) is stronger than that of probability overweighting. For wealth level, self-control has the strongest net effect.
The Impact of Financial Fraud on Technological Innovation: Myopia, Job Security, and Loss of Trust

Given the profound effects of financial fraud on corporate managers, inventors, and cultures, this paper investigates how financial fraud influences technological innovation at both firm and inventor levels. We find that the occurrence of financial fraud is negatively related to firms’ and inventors’ innovation outputs, both quantitatively and qualitatively. This finding is attributed to the negative impact of fraud on individual inventors’ productivity and the number of inventors deployed. Moreover, cross-sectional tests suggest that such impact is more pronounced when top-level management’s tone is more myopic, when fraud is more observable to employees, or when trust between inventors and firms is lacking. Our results hold when we implement an instrumental variable regression based on the SEC’s past enforcement activities and when we include various controls that reflect alternative explanations. In conclusion, our study implies that financial fraud not only hurts shareholders but also damages valuable human capital and results in “brain drain”.
How Do Investors Trade R&D-intensive Stocks? Evidence from Hedge Funds and Other Institutional Investors

We examine how institutional investors trade stocks with high research and development (R&D) expenses and investigate whether they can detect value-relevant R&D. We document significant differences between hedge funds and other institutional investors in their trading in high R&D stocks. We find that hedge funds (other institutional investors) invest more (less) in high R&D stocks compared to all other stocks. Moreover, hedge funds exhibit strong stock-picking ability in high R&D stocks, and hedge funds with larger allocations to high R&D stocks generate higher future fund returns. Our findings suggest that hedge funds have superior skill in identifying value-relevant R&D.