Miracle-dz/UniFAR-FTUs huggingface dataset:
Multi-Product Firms and Misallocation

This paper studies how distortions alter decisions of firms in producing multiple products (MP). Using the Annual Survey of Industrial Firm data in China, we find (i) multi-product firms are fewer and smaller than in the U.S.; (ii) the MP probability of a firm is negatively associated with the level of distortions. We build discrete product choices into a heterogeneous firm model à la Melitz (2003). A tax-like distortion increases the productivity cutoff of an MP firm, and vice versa for a subsidy-like distortion. The model is calibrated to firm-level data of China and the U.S. When distortions are removed, we find a comparable magnitude of welfare gains from the product extensive margin and from firm entry and exit. Both gains are sizable by the general equilibrium forces interacted with the granularity of firm size distributions.
Valuation of an Option to Exchange one Powered Bond for Another

Bond markets are over the counter markets, plagued with illiquidity, price volatility, mispricing, sovereign restructuring issues and other difficulties. We price powered bonds based on an interest rate term structure of a stochastic strings model. Power exchange bond options resolve issues associated with general bond risk management. We obtain closed-form expressions for pricing and hedging bond power exchange options. Sufficient conditions for the equivalence of the European and the American versions of bond power exchange options are provided. The put-call parity relation for this kind of option is also stated. We show connections with standard bond option pricing models and explain the superiority of our model. Finally, we consider several applications of our results including duration and convexity measures for bond power exchange options, pricing extendable/accelerable maturity zero-coupon bonds, options to price a zero-coupon bond off of a shifted term-structure, and options on interest rates and rate spreads. <br>
Terminate to Cooperate: Repeated Games in Self-Sustained Communities

In the current mobile world, repeated relationships ("communities") must be self-sustained. We formulate a framework in which some or all players strategically choose whether to terminate or repeat an N-person game. A dynamic game ends when a certain number of players choose termination. To sustain the maximal set of outcomes while maintaining the community, the players may need to end the interaction as an equilibrium punishment. However, since termination is an absorbing state, players cannot "reward" one another for the appropriate use of termination. We show that voluntary termination is always incentive-compatible when players vote on game continuation/termination simultaneously under non-unanimous ending rules. For other cases, we construct a new mechanism to make termination incentive-compatible. The frontier of equilibrium outcomes can be larger than that of ordinary repeated games without the termination option, but, in that case, the set of equilibrium outcomes expands in the direction of unequal payoffs.
The importance of individual-pair lending relationships

We examine the significance and uniqueness of individual-pair relationships cultivated through repeated loan interactions. Using a hand-collected dataset compiled of borrowing manager and loan officer information, we find that individual-pair relationship loans are associated with a cost-of-debt reduction of between seven to 13 basis points. We also document that the relationship has an economic impact even when other affiliations, for example, institutional pairs, social ties, cultural proximity, and gender, are considered. Individual-pair relationships matter because they furnish lenders with useful soft information, especially when the firm has a poor hard information environment or when the bank and loan officer rely less on hard information. In addition, we find that individual-pair relationship loans have fewer rating downgrades, suggesting that accumulated soft information leads to better loan quality. Collectively, our results highlight the unique value of sustained professional engagement between two individuals in the lending process.
Estimating Heterogeneity in Lifetime Earnings Risk

This paper measures risk in the present value of workers’ remaining lifetime earnings. Building upon a common earnings specification, our estimate combines flexible, heterogeneous forecasts of individuals’ expected earnings growth rates and the variances of potential permanent and temporary annual earnings shocks throughout their future careers. This measure of lifetime risk is only moderately correlated with those annual risks and is a much stronger predictor of several major life decisions. Unlike annual risk, it is often larger for relatively affluent groups. It also has many other covariates, including occupations and industries, and it has risen steadily since 1970.
A Theory of Debt Accumulation and Deficit Cycles

This paper introduces a tractable model of sovereign debt where governments cannot default strategically, but face intertemporal tradeoffs between (i) preferring more primary deficits to less and (ii) avoiding costly defaults. Governments run deficits when debt and, then, the marginal costs of increasing debt are low. However, after an extended period of debt accumulation, default probabilities begin to rise quickly, and so do the marginal costs of running debt. Eventually, debt reaches a critical level relative to the size of the economy, a fiscal tipping point, after which debt accumulation stops, with governments cycling between deficits and surpluses, until perhaps a time of default. The main conclusions are that (i) fiscal tipping points typically occur when distanceto- default is between 10% and 20%; (ii) tipping points are pushed back in a stable macroeconomic environment, such that default premiums are higher in countries that implement austerity earlier and remain positive even when exogenous risk is very small (two “volatility paradoxes”); (iii) liquidity conditions and fiscal reforms may affect default probabilities in an ambiguous way; (iv) fiscal austerity may arrive too late: “debt intolerance” arises around the fiscal tipping point.
Norm-Based Feedback on Household Waste: Large-Scale Field Experiments in Two Swedish Municipalities

We conduct separate randomized controlled trials of norm-based feedback nudges on house-hold waste in two municipalities in western Sweden. Our main treatment presents recipients with accurate, household-specific feedback highly similar to the standard Home Energy Report design, but with residual (unsorted) waste as the object of comparison. We also test a novel ‘dynamic’ norm design informed by psychological research. Post-experimental reductions are on the order of 7-12% in both municipalities, substantially larger than inmost previous studies. We estimate that the reduction corresponds to a 30-60% increase in unit-based waste fees. Effect differences between our main treatment and the dynamic-norm treatment are not significant. We find that feedback nudges are highly cost-effective compared to alternative means for reducing household residual waste. However, net social benefits depend on whether existing waste fees internalize the marginal social cost of residual waste. Our results have implications for the usefulness of feedback interventions as well as for unit-based pricing of waste, on which our feedback materials rely.
Demographics, Property Prices, and Credit Conditions: Analysis Based on Panel Data from 17 Countries Over a Half-Century

Using panel data from 17 countries with varying economic circumstances from 1974 to 2019, we estimate regression models that explain residential property price dynamics by incorporating demographic factors and considering the interaction of those demographics with credit conditions. Our results show the importance of the demographic factors in modeling the long-run equilibrium of residential property prices. We find that the effect of nominal interest rates determined by monetary policy on asset prices varies depending on the country and the degree of population aging at the time. We also find that the persistently optimistic population projections lead to the oversupply of the residential stock in rapidly aging countries, resulting in stagnant residential property markets.
Information Flows and Systematic Risk

The arrival of new information is a source of systematic risk for the holder of a financial security. Using several measures of information flows, we show that a stock’s sensitivity to market-wide information flow is associated with a robust cross-sectional return premium that is distinct from other return premia. We find that the amount of information impounded in prices through trading has increased in recent years consistent with declining trading costs and the rise of algorithmic trading. Consequently, the information flows risk premium is increasing through time.
Pricing Without Mispricing

We offer a novel test of whether an asset pricing model describes expected returns in the absence of mispricing. Our test assumes such a model assigns zero alpha to investment strategies using decade-old information. The CAPM satisfies this condition, but prominent multifactor models do not. While multifactor betas help capture current expected returns on mispriced stocks, persistence in those betas distorts the stocks' implied expected returns after prices correct. These results are most evident in large-cap stocks, whose multifactor betas are the most persistent. Hence, prominent multifactor models distort expected returns, absent mispricing, for even the largest, most liquid stocks. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber. org.
On the Foundations of Competitive Search Equilibrium with and without Market Maker

The literature offers two foundations for competitive search equilibrium, a Nash approach and a market-maker approach. When each buyer visits only one seller (or each worker makes only one job application), the two approaches are equivalent. However, when each buyer visits multiple sellers, this equivalence can break down. Our paper analyzes competitive search equilibrium with simultaneous search using the two approaches. We consider four cases defined by (i) the surplus structure (are the goods substitutes or complements? ) and (ii) the mechanism space (do sellers post fees or prices? ). With fees, the two approaches yield the same constrained efficient equilibrium. With prices, the equilibrium allocation is the same using both approaches if the goods are complements, but is not constrained efficient. In the case in which only prices are posted and the goods are substitutes, the equilibrium allocations from the two approaches are different. <br>
Financial crises and income inequality

This paper examines the effects of financial crises on income inequality using a panel of 128 countries over the period 1960-2019. We focus on different types of financial crises: banking, currency, debt, and twin and triple crises. Our results show that any type of financial crisis results in a larger income gap between the rich and the poor. It is noteworthy that while little attention has been given to debt and twin and triple crises, they are associated with higher income inequality than banking and currency crises. Nevertheless, currency, debt, and twin and triple crises do not significantly relate to income inequality in developed countries.
Gender Composition of Juries and Gender Bias: Performance Evaluations in Professional Diving

We investigate whether the gender of judges as well as the gender composition of juries affect individual performance evaluations using information on single diving competitions at three World Championships. Our results indicate that gender per se does not affect individual opinions, while gender composition does. The more judges of the same gender as the athlete are part of a jury, the higher is the rating of both same- and opposite-gender judges. Thus, findings indicate that female (male) athletes benefit from juries who consist of mostly female (male) judges.
Pricing Implications of Noise

We study the interaction of noisy demand and skewed asset payoffs. In our model, price as a function of quantities is convex in a neighborhood around zero if and only if skewness is positive. The combination of convexity and noise produces the idiosyncratic skewness effect--a documented negative relationship between an asset's idiosyncratic skewness and its expected return. We further offer an explanation for the idiosyncratic volatility puzzle. Finally, our theory predicts that higher idiosyncratic skewness strengthens the idiosyncratic volatility effect (and vice versa). We find support for this prediction in the cross section of stock returns.
Should Investors Consider the Sentiment of Online Discussions? An Analysis of the Link between Fundamental Information, Social Media Sentiment and the Stock Market

This research analyses the link between fundamental information, social media sentiment, and stock returns from 2010 to 2018. We are interested in whether social media sentiment provides additional information to already published fundamental information, such as financial information and analysts forecasts. Therefore, we explore the relationship between fundamental information and sentiment. We find that unexpected earnings, analyst forecast revisions, new dividends, and 8-K filings have a significant impact on sentiment. We introduce the adjusted social media sentiment, which corrects social media sentiment for the impact of this fundamental information. It turns out that adjusted social media sentiment is related to the subsequent stock returns. Moreover, most of social media sentiment's total effect emerges from adjusted sentiment. In particular, stocks with negative sentiment tend to have negative subsequent short-term returns. It is, thus, important to distinguish between positive and negative sentiment. Subsequent long-term returns are more mildly affected suggesting that the impact of negative sentiment seems to be permanent.
Piotroski’s Fscore Under Varying Economic Conditions

Piotroski’s (2000) Fscore has become increasingly important to investment managers and analysts as a simple measure of a company’s financial strength. However how it changes over time, and in particular how it reacts under different economic conditions, has not been considered until now. It is evident from the literature that macroeconomic condition and business cycle affect corporate valuation through affecting stock prices. Macroeconomic conditions also affect corporate liquidity, cash flow, profitability, efficiency, financing and capital structure. Therefore it is highly likely that changing macroeconomic conditions will affect the Fscore by affecting corporate profitability, liquidity and efficiency. We examine the extent to which the Fscore is affected by these macroeconomic changes or shocks. It is important that the Fscore, as a simple and powerful measure of predicting corporate financial strength, should give similar results in any state of the economy so that investors can benefit by using it. We find that macroeconomic conditions have a strong and significant effect on the Fscore; indeed during contractionary episodes they have more effect than firm-level variables. Investors should therefore be cautious in applying the Fscore equally under different macroeconomic conditions.
Tradin’ in the Rain: Attention Allocation and Investment Performance

We propose a multi-asset model to study how attention allocation affects investment performance. Our model predicts that when investors allocate more attention to the stock market, they have better investment performance. This attention effect is stronger among high-beta stocks. Using rainy days as exogenous attention shocks and a nationwide trading dataset at the brokerage-branch level, we first show that retail investors pay more attention to the stock market on rainy days. Consistent with the model predictions, we find that retail investors have better trading performance on rainy days, especially for high-beta stocks. We also find lower return co-movement and stronger market reactions to earnings announcements on rainy days.
Chasing the ESG Factor

In the time-series (ordinal ESG) or the cross-section (cardinal ESG)? We show analytically that, when proper adjustment to guarantee identical ESG ratings is implemented, the return spread of the factors produced by the two methods is merely noise. We provide a protocol to construct a cross-sectional ESG factor with a targeted ESG rating without screening stocks, hence without harming ex ante diversification (Sharpe ratio). The cross-sectional ESG factor neutralizes the exposure to other firm characteristics. Using ratings from several ESG data vendors, we document strong variations in the ESG factor's alpha in the time series and across data vendors. The alpha filtered from realized returns is negatively related to the level of an ESG sentiment variable based on media attention, while it is positively related to unexpected variations of the sentiment.
Ubiquitous Overlap Weight and Propensity Score Residual for Heterogeneous Treatment Effect and Its Estimation

Individual responses to a treatment D=0,1 differ, depending on covariates X. Averaging such a heterogeneous effect is usually done with the density of X, but the average with `overlap weight (OW)' is done "surreptitiously" with X controlled, where OW is the normalized version of PS×(1-PS) with PS denoting the propensity score. This paper brings OW "out of shadow" to advocate more use of OW. OW attains its maximum at PS=0.5, i.e., when subjects in one group have the best overlap with the other group, and OW accords several advantages to treatment effect estimators. First, matching with OW addresses the well-known non-overlapping support problem in a built-in way, without an arbitrary user intervention. Second, inverse probability weighting with OW overcomes the "too small denominator problem", and can become efficient as well. Third, regression adjustment with OW is robust to misspecified outcome regression models. Fourth, covariate balance holds exactly if OW estimated by the method of moment is used. In these advantages, PS residual `D-PS' plays a central role. We also show how seemingly unrelated estimators are in fact closely related through OW, and an empirical analysis illustrates how similar the estimates can be.
Does Investor Sentiment Drive M&As?

In this paper we investigate the relationship between firm-specific investor sentiment, measured by applying text analysis to news stories published by Thomson Reuters, and merger and acquisition (M&amp;A) deals announced by US-listed companies between 1997 and 2018. We find that a more positive investor sentiment increases the probability of firms announcing acquisitions and we investigate a number of potential reasons capable of explaining such a relationship. In this respect, we do not find that the overvaluation hypothesis or the catering theory are able to account for the impact of investor sentiment on acquisition announcements. Instead, by studying the short- and long-run stock market reaction to merger announcements and its relationship with investor sentiment, we find a positive short-run correlation which is reversed in the long-run. These results provide evidence for the overoptimism theory of mergers, which states that, in periods characterized by more optimistic investor sentiment, managers are more induced to pursue acquisitions and that these are better perceived by the stock market, even though they perform worse in the long-run.
Can foreign ownership reduce bank risk? Evidence from Vietnam

This study investigates the impact of foreign ownership on bank risk in Vietnam between 2006 and 2015. Our findings show that foreign ownership can lower bank risk, suggesting that the State Bank of Vietnam should further remove restrictions on foreign investments in the banking system. The findings also indicate that higher bank risk is associated with greater technical efficiency, suggesting that the skimping-cost hypothesis may exist. The same conclusion is true for large banks, for banks with higher liquid assets and those with greater loan growth. Also, the findings demonstrate that assets diversity may reduce bank risk, suggesting that Vietnamese banks should diversify their assets from loans towards derivatives and other earning assets to improve banks’ stability. Finally, our findings demonstrate that a less concentrated market can lower bank risk, suggesting that the future mergers and acquisitions in Vietnam that involve a state-owned commercial bank should be approached with caution.
ESG and the Market Return

We propose an environmental, social, and governance (ESG) index. We find that it has significant power in predicting the stock market risk premium, both in- and out-of-sample, and delivers sizable economic gains for mean-variance investors in asset allocation. Although the index is extracted by using the PLS method, its predictability is robust to using alternative machine learning tools. We find further that the aggregate of environmental variables captures short-term forecasting power, while that of social or governance captures long-term. The predictive power of the ESG index stems from both cash flow and discount rate channels.
Chinese aid and Trust in Africa

We investigate the impacts infrastructure investment has on the historical persistence of mistrust within Africa. We combine geocoded Afrobarometer survey data with infrastructure projects financed by the Chinese government and its agencies. We show that these projects' presence does not diminish the historical levels of mistrust for political leadership within Africa. Furthermore, the difference-in-difference identification strategy confirms that the projects' existence does not positively impact trust in political leadership because of the perception of corruption and lack of performance. Finally, we undertake some falsification tests, all of which suggest that projects in societies with low historical mistrust levels engender high levels of trust in the political leadership, contrary to the findings using the Africa dataset.
Toxic Effects of Zinc Cyanide on Some Protein Metabolites in Fresh water fish, Cirrhinus mrigala (Hamilton)

Effect of zinc cyanide on protein and certain metabolites content and some enzymes activitieswas evaluated in liver, muscle and gill tissues of the freshwater fish, Cirrhinus mrigala, during exposure andfollowing cessation of exposure. Fish exhibited significant alterations in the biochemical parameters in alltissues studied. Levels of total protein decreased in all tissues, where as free amino acids (FAA) and proteaseactivities significantly increased (P<0.05). Similarly decrease was observed in the ammonia level with increasedurea and glutamine levels at all exposure periods. The enzymes involved in the protein metabolism alteredunder the zinc cyanide intoxication. Increase in the protease and aminotransferases revealed amplifiedtransamination processes. Significant increase of phosphatases indicated increased rate of phosphorylationand transport of molecules across the cell membrane. Withdrawal study also exhibited significant recovery inall above biochemical parameters, in all tissue after the 7th day post recovery treatment. Present studyexhibited negative effects of zinc cyanide on protein metabolism. Fish with low protein content were not fitfor human consumption. Patterns of effects on intermediary metabolism suggest avenues to determine themechanisms by which such effects occur.