Breaking the Cycle: How the News and Markets Created a Negative Feedback Loop in COVID-19
New research from CBS Professor Harry Mamaysky reveals how negativity in the news and markets can escalate a financial crisis.
New research from CBS Professor Harry Mamaysky reveals how negativity in the news and markets can escalate a financial crisis.
Adapted from “Global Value Chains in Developing Countries: A Relational Perspective from Coffee and Garments,” by Laura Boudreau of Columbia Business School, Julia Cajal Grossi of the Geneva Graduate Institute, and Rocco Macchiavello of the London School of Economics.
Adapted from “Online Advertising as Passive Search,” by Raluca M. Ursu of New York University Stern School of Business, Andrey Simonov of Columbia Business School, and Eunkyung An of New York University Stern School of Business.
This paper from Columbia Business School, “Meaning of Manual Labor Impedes Consumer Adoption of Autonomous Products,” explores marketing solutions to some consumers’ resistance towards autonomous products. The study was co-authored by Emanuel de Bellis of the University of St. Gallen, Gita Johar of Columbia Business School, and Nicola Poletti of Cada.
Co-authored by John B. Donaldson of Columbia Business School, “The Macroeconomics of Stakeholder Equilibria,” proposes a model for a purely private, mutually beneficial financial agreement between worker and firm that keeps decision-making in the hands of stockholders while improving the employment contract for employees.
At Columbia Business School, our faculty members are at the forefront of research in their respective fields, offering innovative ideas that directly impact the practice of business today. A quick glance at our publication on faculty research, CBS Insights, will give you a sense of the breadth and immediacy of the insight our professors provide.
As a student at the School, this will greatly enrich your education. In Columbia classrooms, you are at the cutting-edge of industry, studying the practices that others will later adopt and teach. As any business leader will tell you, in a competitive environment, being first puts you at a distinct advantage over your peers. Learn economic development from Ray Fisman, the Lambert Family Professor of Social Enterprise and a rising star in the field, or real estate from Chris Mayer, the Paul Milstein Professor of Real Estate, a renowned expert and frequent commentator on complex housing issues. This way, when you complete your degree, you'll be set up to succeed.
Columbia Business School in conjunction with the Office of the Dean provides its faculty, PhD students, and other research staff with resources and cutting edge tools and technology to help push the boundaries of business research.
Specifically, our goal is to seamlessly help faculty set up and execute their research programs. This includes, but is not limited to:
All these activities help to facilitate and streamline faculty research, and that of the doctoral students working with them.
Using micro data on virtually all of the drugs and diseases of over 500,000 people enrolled in Puerto Rico's Medicaid program, the impact of the vintage (original FDA approval year) of drugs used to treat a patient on the patient's three-year probability of survival, controlling for demographic characteristics (age, sex, and region), utilization of medical services, and the nature and complexity of illness are examined. It is found that people using newer drugs during January-June, 2000, were less likely to die by the end of 2002, conditional on the covariates.
We examine the influence of an interstate network created by intergovernmental organizations (IGOs) on the global diffusion of democracy. We propose that IGOs facilitate democracy's diffusion by transmitting information between member states and by interpreting that information according to prevailing norms in the world society, where democracy is viewed as the legitimate form of government. We employ a network autocorrelation model to track changes in democracy among all of the world's countries from 1815 to 2000.
Prices are typically used as proxies for countries' export quality. I relax this strong assumption by exploiting both price and quantity information to estimate the quality of products exported to the U.S. Higher quality is assigned to products with higher market shares conditional on price. The estimated qualities reveal substantial heterogeneity in product markets' scope for quality differentiation, or their "quality ladders." I use this variation to explain the heterogeneous impact of low-wage competition on U.S. manufacturing employment and output.
In this study we estimate empirically the effect of local market conditions on inventory holdings of U.S. automobile dealerships. We show that the influence of competition on a retailer's inventory holdings can be separated into two mechanisms: (1) the entry or exit of a competitor can change a retailer's demand (a sales effect); (2) the entry or exit of a competitor can change the amount of buyer stock a retailer chooses to hold, which influences the probability a consumer finds a desired product in stock (a service level effect).
In this paper, I use anecdotal evidence and logical reasoning to suggest that, despite the use of an extensive database, it is not possible to conclude that passage of the Sarbanes Oxley Act did not have an impact on companies' delisting decisions. Moreover, the instrumental variables used to proxy for SOX effects are too weak and suffer from a significant endogeneity problem given that passage of SOX was driven by many of the economic and control problems that are used to control for market and company factors.
The current work seeks to understand the relationship between luck beliefs and achievement motivation. We hypothesized and found evidence that belief in stable rather than fleeting luck positively relates to achievement motivation (Study 1). Furthermore, belief in stable luck affects achievement motivation via personal agency beliefs (Study 2). These findings add to our understanding of the causal beliefs associated with a sense of mastery and preference for challenging tasks.
Bicultural individuals vary in the degree to which their two cultural identities are integrated versus conflicting — Bicultural Identity Integration (BII). Past research on attribution biases finds that BII influences the way that biculturals shift in response to cultural primes: integrated biculturals shift assimilatively, whereas conflicted biculturals shift contrastively. Proposing that this reflects assimilation versus reactance responses, we tested whether it extends to shifts in self-perceived personality.
We empirically analyze the illicit trade in cultural property and antiques, taking advantage of different reporting incentives between source and destination countries. We thus generate a measure of illicit trafficking in these goods based on the difference between imports recorded in United States' customs data and the (purportedly identical) trade as recorded by customs authorities in exporting countries.
This paper studies the value of external commitment to policy reforms in the case of WTO/GATT accessions. The accessions often entail reforms that go beyond narrowly defined trade liberalization, and have to overcome fierce resistance in the acceding countries, as reflected in protracted negotiations. We study the growth and investment consequences of WTO/GATT accessions, with attention to a possible selection bias. We find that the accessions tend to raise income, but only for those countries that were subject to rigorous accession procedures.
This research investigates hypotheses about differences between Chinese and American managers in the configuration of trusting relationships within their professional networks. Consistent with hypotheses about Chinese familial collectivism, an egocentric network survey found that affect- and cognition-based trust were more intertwined for Chinese than for American managers. In addition, the effect of economic exchange on affect-based trust was more positive for Chinese than for Americans, whereas the effect of friendship was more positive for Americans than for Chinese.
This research investigates hypotheses about differences between Chinese and American managers in the configuration of trusting relationships within their professional networks. Consistent with hypotheses about Chinese familial collectivism, an egocentric network survey found that affect- and cognition-based trust were more intertwined for Chinese than for American managers. In addition, the effect of economic exchange on affect-based trust was more positive for Chinese than for Americans, whereas the effect of friendship was more positive for Americans than for Chinese.
The authors propose that culture affects people through their perceptions of what is consensually believed. Whereas past research has examined whether cultural differences in social judgment are mediated by differences in individuals’ personal values and beliefs, this article investigates whether they are mediated by differences in individuals’ perceptions of the views of people around them.
Stocks with recent past high idiosyncratic volatility have low future average returns around the world. Across 23 developed markets, the difference in average returns between the extreme quintile portfolios sorted on idiosyncratic volatility is -1:31% per month, after controlling for world market, size, and value factors. The effect is individually significant in each G7 country. In the United States, we rule out explanations based on trading frictions, information dissemination, and higher moments.
Accumulating evidence suggests that targets' displays of emotion shape perceivers' impression of those targets. Prior research has highlighted generalization effects, such as an angry display prompting an impression of hostility. In two studies, we went beyond generalization to examine the interaction of displays and behaviors, finding new evidence of augmenting effects (behavior-correspondent inferences are stronger when behavior is accompanied by positive affect) and discounting effects (such inferences are weaker when behavior is accompanied by negative affect).
Accumulating evidence suggests that targets' displays of emotion shape perceivers' impression of those targets. Prior research has highlighted generalization effects, such as an angry display prompting an impression of hostility. In two studies, we went beyond generalization to examine the interaction of displays and behaviors, finding new evidence of augmenting effects (behavior-correspondent inferences are stronger when behavior is accompanied by positive affect) and discounting effects (such inferences are weaker when behavior is accompanied by negative affect).
This monograph focuses on the use of incomplete contracting models to study transfer pricing. Intrafirm pricing mechanisms affect division managers' incentives to trade intermediate products and to undertake relationship-specific investments so as to increase the gains from trade. Letting managers negotiate over the transaction is known to cause holdup (underinvestment) problems. Yet, in the absence of external markets, negotiations frequently outperform cost-based mechanisms, because negotiations aggregate cost and revenue information more efficiently into prices.
This paper examines liquidity and how it affects the behavior of mutual fund portfolio managers, who account for a significant portion of trading in many assets. We define an asset to be perfectly liquid if a portfolio manager can trade the quantity she desires when she desires at a price not worse than the uninformed expected value. A portfolio manager is limited by both what she needs to attain and the ease with which she can attain it, making her sensitive to three dimensions of liquidity: price, timing, and quantity.
As the record of Fed interventions from December 2007 to December 2008 make abundantly clear, a foremost concern of monetary authorities in responding to the financial crisis has been to avoid a repeat of the great depression, and especially a repeat of the monetary contraction identified as the major cause of the 1930s depression.
As the record of Fed interventions from December 2007 to December 2008 make abundantly clear, a foremost concern of monetary authorities in responding to the financial crisis has been to avoid a repeat of the great depression, and especially a repeat of the monetary contraction identified as the major cause of the 1930s depression.
Traditional monopoly pricing models assume that firms have full information about the market demand and consumer preferences. In this article, we study a prototypical monopoly pricing problem for a seller with limited market information and different levels of demand learning capability under relative performance criterion of the competitive ratio (CR). We provide closed-form solutions for the optimal pricing policies for each case and highlight several important structural insights.
We investigate how nonfinancial performance measures (NPMs) can be used to encourage cooperation across divisions. The implementation of a project often requires joint efforts by multiple divisions. However, privately informed division managers sometimes find it in their self-interest to forgo profitable joint projects or to underinvest in relationship-specific assets.
Past work on interpersonal assertiveness and organizational effectiveness paints a mixed picture: some research suggests a positive link, other work highlights negative effects. This article reviews recent research and an account that stems from a different perspective, looking at assertiveness as a factor in leadership shortcomings and failure. This approach suggests that interpersonal assertiveness is a major factor and has a curvilinear, inverted-U-shaped relationship with leadership effectiveness. I review evidence for this effect as well as social and instrumental outcome mediators.
We revisit and critically reevaluate the widely accepted modernization hypothesis which claims that per capita income causes the creation and the consolidation of democracy. Existing studies find support for this hypothesis because they fail to control for the presence of omitted variables. Controlling for these factors either by including country fixed effects in a linear model or by including parameterized random effects in a non-linear double hazard model removes the correlation between income and the likelihood of transitions to and from democratic regimes.
In this article, we dissect changes in the composition of Indian imports following its 1991 trade liberalization to illustrate the potential scope for previously unavailable inputs to bolster the performance of domestic firms. The analysis reveals that trade reform spurred imports of previously unavailable products and varieties in many products that arguably can be characterized as important inputs for manufacturing firms. New imported inputs in large extent originated from more advanced countries and new imported varieties exhibited higher unit values relative to existing imports.
Four studies investigated whether activating a social identity can lead group members to choose options that are labeled in words associated with that identity. When political identities were made salient, Republicans (but not Democrats) became more likely to choose the gamble or investment option labeled "conservative." This shift did not occur in a condition in which the same options were unlabeled.
The authors propose that culture affects people through their perceptions of what is consensually believed. Whereas past research has examined whether cultural differences in social judgment are mediated by differences in individuals’ personal values and beliefs, this article investigates whether they are mediated by differences in individuals’ perceptions of the views of people around them.
This article discusses research into the effect of gender role expectations in distributional negotiations. The differences between the gender effects in personally oriented negotiations and those undertaken on behalf of another party are considered. This hypothesis is indicated by research suggesting that community oriented behaviors are feminine while acting on personal agency is considered masculine. The role of anticipated responses, particularly the anticipation of backlash, in determining the gendered aspects of distributional negotiation is explored.
Traditional explanations for indirect trade through an entrepot focus on savings in transport costs and the role of specialized agents in processing and distribution. We provide an alternative perspective based on the potential for entrepots to facilitate tariff evasion. Using data on direct exports to mainland China and indirect exports via Hong Kong SAR, we find that the indirect export rate rises with the Chinese tariff rate, despite the absence of any legal tax advantage to sending goods via Hong Kong SAR.
We revisit one of the central empirical findings of the political economy literature that higher income per capita causes democracy. Existing studies establish a strong cross-country correlation between income and democracy but do not typically control for factors that simultaneously affect both variables. In the post-war sample, we show that controlling for such factors by including country fixed effects removes the statistical association between income per capita and various measures of democracy.
Was the adoption of the euro accompanied by an increase in prices? Did it promote goods market arbitrage in the form of faster convergence to a common price? By comparing the experience of eurozone countries to non-euro European countries in a "difference-in-differences" specification, we net out effects on prices unrelated to the euro. We find neither evidence of significant price increases associated with the euro, nor evidence of a significant improvement in market integration.
This paper compares centralized and decentralized coordination when managers are privately informed and communicate strategically. We consider a multi-divisional organization in which decisions must be adapted to local conditions but also coordinated with each other. Information about local conditions is dispersed and held by self-interested division managers who communicate via cheap talk. The only available formal mechanism is the allocation of decision rights. We show that a higher need for coordination improves horizontal communication but worsens vertical communication.
The present paper seeks to explain varying levels of assertiveness in interpersonal conflict and negotiations with assertiveness expectancies, idiosyncratic predictions people make about the social and instrumental consequences of assertive behavior. This account complements motivation-based models of assertiveness and competitiveness, suggesting that individuals may possess the same social values (e.g., concern for relationships) but show dramatically different assertiveness due to different assumptions about behavioral consequences.
This paper compares centralized and decentralized price setting by a firm that sells a single product in two markets, but is constrained to set one price (e.g., due to arbitrage). Each market is characterized by a different linear demand function, and demand conditions are privately observed by a local manager. This manager only cares about profits in his own market and, as a result, communicates his information strategically. Our main results link organizational design to market demand.
This paper examines coworker networks in the American, Chinese, German, and Spanish divisions of a global retail bank. Because the bank has standardized structure and policies across countries, it is possible to examine how norms rooted in national culture impact on various features of informal ties. We propose that cultures vary in the models on which coworker interaction norms are based, with market, family, law, and friendship relations serving as alternative templates.
We combine data from the housing market with data from the North Carolina Sex Offender Registry to estimate how individuals value living in close proximity to a convicted criminal. We use the exact location of sex offenders to exploit variation in the threat of crime within small homogeneous groupings of homes, and we use the timing of sex offenders' arrivals to control for baseline property values in the area. We find statistically and economically significant negative effects of sex offenders' locations that are extremely localized.
Consider an economy in which the underlying security returns follow a linear factor model with constant coeffcients. While portfolios that invest in these securities will, in general, have a linear factor structure, it will be one with time-varying coeffcients. However, under certain assumptions regarding the portfolio's investment strategy, it is possible to estimate these time-varying alphas and betas.
Recent evidence suggests that many organizational members and leaders are seen as under- or over-assertive by colleagues, suggesting that having the "right touch" with interpersonal assertiveness is a meaningful and widespread challenge. In this article, I review emerging work on the curvilinear relation between assertiveness and effectiveness, including evidence from both qualitative descriptions of coworkers and ratings of colleagues and leaders.
Individuals engage in status self-enhancement when they form an overly positive perception of their status in a group. We argue that status self-enhancement incurs social costs and, therefore, most individuals perceive their status accurately. In contrast, theories of positive illusions suggest status self-enhancement is beneficial for the individual and that most individuals overestimate their status. We found supportive evidence for our hypotheses in a social relations analysis of laboratory groups, an experiment that manipulated status self-enhancement, and a study of real-world groups.
Competing organizations are often defined by their niche overlap or structural equivalence in resource dependence, but the very structure that defines competitors can also identify cooperators. There is a fine line between competition and cooperation, but current theories give insufficient guidance as to which will take place and also contribute to the belief that cooperation between competitors is illegitimate. We show that the legitimacy of these practices, as well the evaluation of their welfare implications, are context bound.
Competing organizations are often defined by their niche overlap or structural equivalence in resource dependence, but the very structure that defines competitors can also identify cooperators. There is a fine line between competition and cooperation, but current theories give insufficient guidance as to which will take place and also contribute to the belief that cooperation between competitors is illegitimate. We show that the legitimacy of these practices, as well the evaluation of their welfare implications, are context bound.
Prior research shows that perceivers can judge some traits better than others in first impressions of targets. However, questions remain about which traits perceivers naturally do infer. Here, we develop an account of the "agreeableness asymmetry": although perceivers show little ability to accurately gauge target agreeableness in first impressions, we find that agreeableness is generally the most commonly-inferred disposition among the Big Five dimensions of personality (agreeableness, extraversion, conscientiousness, openness, and emotional stability).
Historical and empirical data have linked artistic creativity to depression and other affective disorders. This study examined how vulnerability to experiencing negative affect, measured with biological products, and intense negative emotions influenced artistic creativity. The authors assessed participants' baseline levels of an adrenal steroid (dehydroepiandrosterone-sulfate, or DHEAS), previously linked to depression, as a measure of affective vulnerability.
We analyze data on fees paid to investment bankers and acquisition premia paid for targets in cash tender offers. Our results are broadly consistent with the predictions of a benign view of the role of investment banks in advising acquisition targets. Fees to investment banks are correlated with attributes of transactions and target firms in ways that make sense if banks are being paid for processing information. The more contingent (and, therefore, risky) the fees, the higher they tend to be, all else held constant.
We analyze data on fees paid to investment bankers and acquisition premia paid for targets in cash tender offers. Our results are broadly consistent with the predictions of a benign view of the role of investment banks in advising acquisition targets. Fees to investment banks are correlated with attributes of transactions and target firms in ways that make sense if banks are being paid for processing information. The more contingent (and, therefore, risky) the fees, the higher they tend to be, all else held constant.
We match Big Mac prices with prices of its ingredients as a unique prism to study real exchange rates (RERs). This approach has several advantages. First, the levels of the Big Mac RER can be measured meaningfully. Second, as the exact composition of a Big Mac is known, the contributions of its tradable and non-tradable components can be estimated relatively precisely. Third, the dynamics of the RER can be studied in a setting free of several biases inherent in CPI-based RERs. Finally, a large cross-country dimension allows us to overturn the Engel result on what drives RERs.
This paper examines two related issues: (a) the implicit methodology used by the U.S. Treasury in determining whether China and America's other trading partners manipulate their exchange rates, and (b) the nature of the Chinese exchange rate regime since July 2005.
While new conventional wisdom warns that developing countries should be aware of the risks of premature capital account liberalization, the costs of not removing exchange controls have received much less attention. This paper investigates the negative effects of exchange controls on trade. To minimize evasion of controls, countries often intensify inspections at the border and increase documentation requirements. Thus, the cost of conducting trade rises.
Surveys do! We examine the forecasting power of four alternative methods of forecasting U.S. inflation out-of-sample: time-series ARIMA models; regressions using real activity measures motivated from the Phillips curve; term structure models that include linear, non-linear, and arbitrage-free specifications; and survey-based measures. We also investigate several methods of combining forecasts. Our results show that surveys outperform the other forecasting methods and that the term structure specifications perform relatively poorly.
This paper uses a unique dataset from Denmark to investigate the impact of family characteristics in corporate decision making and the consequences of these decisions on firm performance. We focus on the decision to appoint either a family or external chief executive officer (CEO). The paper uses variation in CEO succession decisions that result from the gender of a departing CEO's firstborn child.
This paper furnishes robust evidence that the WTO has had a strong positive impact on trade, amounting to about 120 percent of additional world trade (or US$ 8 trillion in 2000 alone). The impact has, however, been uneven. This, in many ways, is consistent with theoretical models of the GATT/WTO. The theory suggests that the impact of a country's membership in the GATT/WTO depends on what the country does with its membership, with whom it negotiates, and which products the negotiation covers.