Miracle-dz/UniFAR-FTUs huggingface dataset:
Multi-Asset Market Impact and Order Flow Commonality

The empirical finding that market movements in stock prices may be correlated with the order flow of other stocks has led to the notion of "cross-impact" and has prompted the development of multivariate models of market impact. These models are parametrized by a matrix of impact coefficients whose off-diagonal elements are meant to capture how trades in one asset influence the price of other assets, leading to a large number of 'cross-impact' parameters which may not be identified solely based on the covariance of returns with order flow. Moreover, empirical evidence suggests that these cross-impact terms are unstable and change sign randomly over time, which poses a problem for their interpretation and use. We reexamine this empirical evidence from a causal standpoint and offer a simpler explanation for the observed correlation between the returns of an asset and the order flow imbalance of other assets, in terms of common components in order flow across stocks which may naturally arise from multi-asset trading strategies. <br><br>We provide empirical evidence from order flow and price changes of NASDAQ-100 stocks to support this explanation. Our results show the main determinants of impact to be idiosyncratic order flow imbalance as well as a market order flow factor common across stocks. Additional ‘cross-impact’ terms account for less than 1% of market impact. This leads to a parsimonious approach for causal modelling of multi-asset impact, which does not require introducing any concept of "cross-impact".
Pricing with Consumer Sequential Choice Model and Its Application in the Design of a Threshold-Type Promotion

A threshold-type promotion is to discount items by a flat dollar amount when a consumer’s total consumption level exceeds a given threshold. The goal of this paper is to understand the effect of the promotion on companies’ sales and profit and propose a data-driven approach to jointly price items and optimize the promotion decisions. We propose a novel sequential choice model to characterize a consumer’s choice of multiple items in a single transaction. The sequential choice model generalizes the traditional choice model, which assumes at most one item chosen in one transaction. Based on that, we establish a general convex pricing optimization framework under mild conditions. We further show that the threshold-type promotion problem fits in the framework with an extra set of pricing constraints. Finally, we provide a data-driven approach based on the proposed pricing model to solve a joint pricing and promotion design problem. Under the assumption of exponential marginals, we estimate the choice model from sales data by a linear program and obtain the optimal price and promotion by solving a mixed-integer linear program. Finally, several numerical studies are conducted to test the efficiency of the framework and understand the effect of promotion on companies’ profit.
Delaying Bad News: Evidence from a Coordinated Strategy using Accrual Choices and Management Forecasts

We provide evidence that some managers delay the revelation of bad news using a coordinated strategy involving reported accruals and earnings forecasts. Specifically, we observe a correlated bias in contemporaneous accruals and management forecasts when both indicate higher, but not lower, future performance. Furthermore, this bias occurs in periods preceded by poor economic performance, where there are stronger incentives to delay revealing the full extent of the bad news. In addition, the joint use of inflated accruals and optimistic management forecasts is associated with optimism in analysts’ subsequent forecasts and with a decline in stock prices over the following year, suggesting that managers successfully delay the revelation of bad news using this strategy. Finally, evidence from financial statement misstatements (identified through subsequent restatements) is consistent with sample firm managers jointly issuing optimistic guidance and manipulating accruals outside of Generally Accepted Accounting Principles.
The Government Spending Multiplier in Latin American Countries: Does the Institutional Environment Matter?

PurposeMora and Acevedo (2019) report that the government spending multipliers in Latin American countries are notably higher than what is typically reported for developed economies. Latin American countries have been inclined toward using procyclical fiscal policies. Those policies have been perceived as being effective at mitigating the effects of the 2008–2009 Great Recession. This study aims to estimate the government spending multiplier using Latin American panel data from 19 Latin American countries from 2000 to 2018. The estimates are conditional on the extent of openness, capital mobility and economic freedom. Based on the results, the latter is important: the less economically free a country, the larger its spending multiplier. Lower economic freedom in Latin American countries can help to account for their large spending multipliers. In particular, restrictions on international trade are positively associated with multipliers. This is the case even while controlling the trade share of GDP. Design/methodology/approachThe authors provide regression results that are conditional on the extent of openness, capital mobility and economic freedom. FindingsThe less economically free a country, the larger its spending multiplier. Lower economic freedom in Latin American countries can help to account for their large spending multipliers. In particular, restrictions on international trade are positively associated with multipliers. This is the case even while controlling the trade share of GDP. Originality/valueTo the best of the authors’ knowledge, this is first study to estimate the fiscal multiplier conditional on economic freedom levels. The authors provide correctly calculated multipliers conditional on different levels of economic freedom. The authors point the way to future studies considering the effectiveness of fiscal policy conditional on institutional/policy quality.
Forecasting Mortality with International Linkages: A Global Vector-Autoregression Approach

Abstract This paper proposes a Global Vector Autoregression (GVAR) mortality model to simultaneously model and forecast multi-population mortality dynamics. The proposed GVAR model decomposes the global regression model into population-wise local systems. Each local system consists of an intra-population autoregressive component and a small set of global factors, which contain systematic mortality information of all populations. Such a decomposition substantially reduces the extra estimation cost of including new populations compared to unconstrained VAR models, and makes the GVAR model an efficient tool for analyzing the joint mortality dynamics of a large group of populations. Further, under fairly general assumptions, the proposed GVAR model could generate coherent mortality projections between any two ages in any two populations. Using single-age mortality data of 15 low-mortality countries, we find that the global factors have substantial explanatory and forecasting power of mortality changes of individual populations, and the proposed GVAR model could produce satisfying mortality forecasts under various settings.
Fair Value Accounting, Financial Stability and the Global Financial Crisis

When analysing the GFC and other crisis, it is important to identify the root cause(s), trigger(s) and amplifier(s). Crisis experience suggests that there is almost always a build-up period facilitated by one or more root causes. A set of root causes and amplifiers are needed for a market disruption as severe as GFC to come to existence. Without these, market disruption caused by trigger event is highly likely to be contained. GFC was a multifaceted disruption; it had various components which contributed to the build-up of the crisis and the resulting contagion. It was a reflection of structural flaws in the financial system, mainly in US. Often-quoted issues like excessive use of leverage, securitization, derivative markets and credit ratings are mostly a result of these structural flaws in the financial system. Problems relating to lack or lag of regulation and inadequate supervision also had a substantial role. FVA may have acted as an amplifier during the GFC. However, if any, its impact was limited. FVA has some serious flaws, like hypothetical market participant and her hypothetical assumptions, but it should be kept in mind that FVA standards are more of a strong guidance, not a straightforward recipe.
Assessing Maximal Dependence Within Extreme Co-Movements of Financial Instruments

Assessing dependence within extreme co-movements of financial instruments has been of much interest in risk management. Typically, indices of tail dependence are used to quantify the strength of such dependence, although many of the indices that we find in the literature underreport the strength due to equal treatment of the instruments in the tail of their loss distributions. When this becomes an issue, we advocate the use of a procedure designed to estimate the maximal strength of dependence that can possibly occur among the co-movements. We illustrate the performance of the procedure and its implementation using simulated and real data-sets. Detailed analyses of foreign currency exchange rates, stock market indices, and treasury notes are given.
A Rent Protection Explanation for SEO Flotation Method Choice

We model how a rent-protection motive drives the choice of flotation method in new equity issuance between two polar cases: rights issues and cash offers. Unexpected new blockholders would emerge in control-diluting cash offers and share in jealously guarded control benefits. But rights issues help the incumbent controlling shareholders avoid control dilution and safeguard their private benefits. Under asymmetric information about private benefits, the choice of flotation method can convey information about hidden private benefits and hence firm value. Our model can explain even a negative announcement effect of rights issues, and supports not just one but three important equilibriums.
Managerial Accounting Information Competencies of Sugarcane Planting in Thailand

This study investigated the consequences of managerial accounting information competencies (MAICs) on agricultural innovation that consists of decision making accuracy, effectiveness of productivity, improvement of cost management enhance to sustainability competitive advantage of Thai sugarcane farmers. The information elicited from the participants was tested against sustainability competitive advantage. A sample of 306 sugarcane farmers who are chief sugarcane quotas in Kamphaeng Phet province, Thailand were chosen and data were collected through questionnaires. Ordinary least squares regression analysis revealed that the accounting information competencies were positively related to decision making accuracy, effectiveness of productivity, and improvement of cost management. In addition, these factors were found to have a positive effect on sustainability competitive advantages. Moreover, managerial accounting information competencies had also a positive effect on sustainability competitive advantages. This implied that the MAICs and the factors that are consequences of MAICs raise performance to better sector their MAICs activities. In the eve of the ASEAN treaty, MAICs can help Thai farmers improve their sustainability competitive advantages.
Infinite Horizon Dynamic Optimization With Unbounded Returns: Necessity, Sufficiency, Existence, Uniqueness, Convergence and a Sequence of Counterexamples

In this paper, we state sufficiency, necessity, convergence, existence and uniqueness results for infinite horizon optimal control problems with unbounded payoffs in which the assumptions are very weak and there are no topological assumptions about the model components. We also state a sequence of simple counterexamples for various popular false beliefs, often used over-simplifications of methodology or same incorrect results in this field. <br>
Central Bank Governance in Monetary Policy Economics (1981-2020)

The aim of the paper is to shed light on how two factors – central bank’s design and central bankers’ preferences – progressively assumed a crucial role in the evolution of monetary policy economics in the last four decades. The two factors jointly identify the importance of central bank governance in influencing monetary policy decisions through their interactions with the monetary policy rules, given the assumptions about how macroeconomic systems work.
Corporate Social (Ir)responsibility and Firm Risk: The Role of Corporate Governance

This study examines how corporate governance moderates the association between corporate social responsibility (CSR)/corporate social irresponsibility (CSI) and firm risk. In adopting this research design, our research simultaneously tests three prevailing theories, i.e., Corporate Social Performance (CSP)-as-insurance theory, product differentiation theory and agency theory. Our results suggest that CSR activities can lead to greater risk reduction for firms with governance characteristics indicating stronger information intensity/transparency and CSP alignment. Conversely, the positive association between CSI and firm risk is more pronounced for firms with corporate governance characteristics that indicate greater information intensity/transparency and CSP alignment. In general, our evidence supports product differentiation theory while being inconsistent with agency theory and CSP-as-Insurance theory in linking CSR/CSI to firm risk.
Corporate Succession Practices and the Impact on Portfolio Returns

Recent years have seen a rapid acceleration in the adoption of stakeholder value creation as a core tenet of sound business practice. We examine the impact of a firm's succession practices on a typical financial stakeholder: one who holds a company's stock as part of a diversified investment portfolio. We find that mainly due to intellectual capital losses at firms supplying talent, external executive hiring decisions expected to maximize the hiring firm's value can reduce shareholders' portfolio value. We use the literature, direct calculation, empirical analysis, and an economic model to quantify costs imposed on those who own shares of firms within the context of a larger portfolio. Assuming managers' value-maximizing assignment to jobs, the estimated cost for the S&amp;P 1500, a representative portfolio, is conservatively 0.98 percentage points per year of portfolio returns. Our research motivates portfolio holders to increase their focus on firms' succession practices.
Effectiveness of Earnings Management Control Mechanisms in India: A Diagnostic Study Using Structural Equation Modelling

The paper aims to analyse effectiveness of earnings management control mechanism in controlling earnings management activities in India. Specifically, effectiveness of corporate governance, external auditing and accounting standards in controlling earnings management practices are analysed. Primary data regarding auditor’s and accountant’s perception has been collected using structured questionnaire 205 respondents and analysed using descriptive statistics and Structural Equation modelling. The analysis shows that accrual based earnings management has significantly negative relationship with internal corporate governance, external audit and accounting standards. But real activity manipulations have significant negative relationship only with external audit. The findings of the research would pave a base for the regulators to strengthen the earnings anagement control mechanisms and other stakeholders could use the findings of the research to understand whether their interests in the companies are protected. This is the first study in India analysing auditors and accountants’ perception regarding accrual based earnings management practices and real activity manipulations and effectiveness of earnings management control mechanisms to the best of authors’ knowledge.
Investor Betas

Investors’ return on their portfolios, as proxied by the market, is a theoretically appealing but empirically unsuccessful asset pricing factor. In practice, many institutional investors choose to deviate substantially from the market portfolio. We propose a simple model in the spirit of Merton (1987) which implies that an asset’s expected return is linear in its average idiosyncratic beta with respect to each active investor’s portfolio return. We estimate this relation using 13F holdings data for active investors and find that a unit increase in investor betas commands 5-10% greater annual expected return. The results are robust to alternative ways of estimating betas and using daily or monthly returns. In sum, investors appear to be compensated for holding stocks that have a high covariance with the idiosyncratic component of their portfolio.
Causal Evidence on the Effects of Enforcement Investigations

We examine the costs and benefits of financial reporting enforcement investigations using a proprietary data set on randomly and risk-based selected enforcement investigations of listed German firms from 2005 to 2018. We find that risk-based selected firms show significant abnormal returns of -15.4 percent during investigations, whereas randomly selected firms do not show abnormal changes in firm value. Analyzing the role of selection reveals that the negative abnormal returns for risk-based selected investigations are likely the result of selection, and not caused by investigations themselves. Consistently, we find that risk-based selected firms, but not randomly selected firms, change their financial reporting behavior and transparency during enforcement investigations. Collectively, our study suggests that the negative firm-level outcomes of enforcement investigations as shown by prior research are likely a result of the selection process, and that enforcement investigations per se do not cause significant costs or benefits.
Doing Well by Doing Good? Risk, Return, and Environmental and Social Ratings

We analyze the risk and return characteristics across firms sorted by their environmental and social (ES) ratings. We document that ES ratings have no significant relationship with average returns nor unconditional market risk. Firms with higher ES ratings do have significantly lower systematic downside risk. However, a firm's downside risk decreases by only 2--4% of its interdecile range for an interdecile-range increase in a firm's ES score. Realized firm news sentiment and institutional trading patterns are also consistent with these results. Our evidence suggest that the risk-return considerations cannot be the sole rationale for or against ES investing.
Conceptual Foundations and Empirical Advances of Economic Resilience with Extensions to Complexity, Entropy and Spatial Dynamics

This chapter presents, further clarifies, and extends the foundations of economic resilience, with an eye to concerns of measurement. We examine the potential usefulness of theoretical concepts and empirical analyses in related fields such as ecology, management, regional science, and planning. We contend that there exists no single best approach to defining or measuring resilience across disciplines and that research should evolve to fit specific applications, though adhering to sound principles within each discipline. We illustrate the usefulness of our conceptual foundations in the design of an econometric analysis of economic resilience and summarize its application to survey data from two major disasters. In relation to the themes of this volume, economic resilience can serve to reduce entropy by countering the disarray in an economy in the aftermath of a disaster. At the microeconomic level, this also intersects with complexity in terms of synergies within an individual firm, and at the macroeconomic level manifests itself most notably through supply-chain interactions and network effects. In terms of spatial dynamics, it relates to geographic shifts in the location of economic activity by actual physical relocation of businesses, shifts of activity to branch plants, and the rebalancing of trade across regions.
Accounting Conservatism and Income Smoothing after the Japanese Sarbanes–Oxley Act

Lobo and Zhou (2006) find an increase in accounting conservatism following the Sarbanes–Oxley Act of 2002. In Japan, the Financial Instruments and Exchange Act of 2006, the so-called Japanese Sarbanes–Oxley Act (J-SOX), was implemented for fiscal years ending on or after March 31, 2009. Consistent with Lobo and Zhou (2006), we first investigate the change in accounting conservatism following J-SOX and demonstrate an increase in accounting conservatism in the post-J-SOX period. In particular, using the Basu (1997) measure of conservatism, we find that the degree to which firms incorporate losses more quickly than gains in their earnings is greater in the post-J-SOX period. We also find that firms report lower discretionary accruals in the post-J-SOX period. In addition to accounting conservatism, this study focuses on income smoothing and demonstrates a decrease in income smoothing following J-SOX. The evidence suggests that J-SOX may have altered managers’ accounting discretionary behavior.
Consumer Salience and Quality Provision in (Un)Regulated Public Service Markets

This paper examines the publication of quality indicators in service markets with public finance systems, such as education and healthcare markets. We provide a spatial model of product differentiation in which the reporting of such indicators increases consumers’ decision weight on quality relative to other attributes (such as prices and horizontal match) and study the effects in two market environments: markets with regulated prices and markets with unregulated prices. We find that the publication of quality indicators increases quality investments by service providers, but also leads to higher prices and less product variety. Consumer and total welfare may decrease with such policies, in particular when consumers are heavily subsidised.
Markups for Consumers

Abstract A central motivating factor for studying price markups is their effect on consumer welfare. However, reported estimates of (firm-level) price markups in the literature often focus on industry or cross-country comparisons. These treat different industries equally rather than based on how relevant they are for consumers. We propose markup measures in which firm-level price markups are weighted according to consumption expenditures in the respective industries. Using a concordance table between consumption categories (otherwise used for the calculation of consumer price indices) and a firm’s industry classification, we report results for Germany for the years 2002 through 2016. We find that consumption-weighted price markups are higher and have increased faster than the conventionally reported revenue-weighted markups. We further show that consumption-weighted markups are highest for low-income households, highlighting the potential role of price markups as a contributing factor to changes in inequality in society.