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.
Current accounting practice expenses many investments in intangible assets to the income statement, confusing earnings from current revenues with investments to gain future revenues. This has led to increasing calls to book those investments to the balance sheet. Drawing on the relevant research, this paper proposes solutions for the accounting for intangible assets that contrast with balance sheet recognition, and compares them to current practice and the IFRS standards that dictate practice.
Common wisdom holds that uncertainty impedes trade—yet we show that uncertainty can fuel more trade in a simple general equilibrium trade model with information frictions. In equilibrium, increases in uncertainty increase both the mean and variance in returns to exporting. This implies that trade can increase or decrease with uncertainty, depending on preferences. Under general conditions on preferences, we characterize the importance of these forces using a sufficient statistics approach.
Using US Census employer-employee matched data, I show that employer financial distress accelerates the exit of employees to found start-ups. This effect is particularly evident when distressed firms are less able to enforce contracts restricting employee mobility into competing firms. Entrepreneurs exiting financially distressed employers earn higher wages prior to the exit and after founding start-ups, compared to entrepreneurs exiting non-distressed firms. Consistent with distressed firms losing higher-quality workers, their start-ups have higher average employment and payroll growth.
Companies that freeze defined benefit pension plans save the equivalent of 13.5% of the long-horizon payroll of current employees. Furthermore, firms with higher prospective accruals are more likely to freeze their plans. Cost savings would not be possible in a benchmark model in which i) all workers receive compensation equal to their marginal product and ii) workers value equally all identical-cost forms of pension benefits.
"Big data" financial technology raises concerns about market inefficiency. A common concern is that the technology might induce traders to extract others' information, rather than to produce information themselves. We allow agents to choose how much they learn about future asset values or about others' demands, and we explore how improvements in data processing shape these information choices, trading strategies and market outcomes. Our main insight is that unbiased technological change can explain a market-wide shift in data collection and trading strategies.
The Great Recession was a deep downturn with long-lasting effects on credit, employment and output. While narratives about its causes abound, the persistence of GDP below pre-crisis trends remains puzzling. We propose a simple persistence mechanism that can be quantified and combined with existing models. Our key premise is that agents don't know the true distribution of shocks, but use data to estimate it non-parametrically. Then, transitory events, especially extreme ones, generate persistent changes in beliefs and macro outcomes.
The increased focus on misinformation has spurred development of data and systems for detecting the veracity of a claim as well as retrieving authoritative evidence. The Fact Extraction and VERification (FEVER) dataset provides such a resource for evaluating end-to-end fact-checking, requiring retrieval of evidence from Wikipedia to validate a veracity prediction.
Climate change has myriad physical and economic impacts. Even those that can be easily quantified indicate the need for ambitious climate action. Other climate impacts have yet to be quantified. We argue here that uncertainties in climate and weather extremes only further increase the social cost of carbon emissions.
We extract aggregate demand and supply shocks for the US economy from real-time survey data on inflation and real GDP growth using a novel identification scheme. Our approach exploits non-Gaussian features of macroeconomic forecast revisions and imposes minimal theoretical assumptions. After verifying that our results for US post-war business cycle fluctuations are largely in line with the prevailing consensus, we proceed to study output and price fluctuations during COVID-19. We attribute two thirds of the decline in 2020:Q1 GDP to a negative shock to aggregate demand.
We distinguish between "good" and "bad" carry trades constructed from G-10 currencies. The good trades exhibit higher Sharpe ratios and sometimes positive return skewness, in contrast to the bad trades that have both substantially lower Sharpe ratios and highly negative return skewness. Surprisingly, good trades do not involve the most typical carry currencies like the Australian dollar and Japanese yen.
Why does power lead to action? Theories of power suggest it leads to action because it presses the psychological gas pedal. A review of two decades of research finds, instead, that power releases the psychological brakes on action. Power releases the psychological brakes on action by making failure seem less probable and feel less painful, thereby decreasing the downside risks of action. Power releases the psychological brakes on action by shrouding the feelings and thoughts of others, thereby diminishing the perceived social costs of action.
This paper shows that when the bankruptcy code protects the creditors' rights with no impairments to secured creditors, issuance of debt such as repo with exemption from automatic stay adds no value. When the bankruptcy process admits violations of absolute priority rules or results in collateral impairments to secured creditors, the liability structure includes short-term debt, with safe harbor protection when the pledged collateral satisfies a minimum liquidity threshold.
The Centers for Medicare & Medicaid Services (CMS) and the National Quality Forum have endorsed the 30-day mortality rate as an important indicator of hospital quality. Concerns have been raised, however, as to whether post-discharge mortality rates are reasonable measures of hospital quality as they consider the frequency of an event that occurs after a patient is discharged and no longer under the watch and care of hospital staff. Estimating the causal effect of length-of-stay (LOS) on post-discharge mortality from retrospective data introduces a number of econometric challenges.
The Centers for Medicare & Medicaid Services (CMS) and the National Quality Forum have endorsed the 30-day mortality rate as an important indicator of hospital quality. Concerns have been raised, however, as to whether post-discharge mortality rates are reasonable measures of hospital quality as they consider the frequency of an event that occurs after a patient is discharged and no longer under the watch and care of hospital staff. Estimating the causal effect of length-of-stay (LOS) on post-discharge mortality from retrospective data introduces a number of econometric challenges.
We decompose the returns of five well-known anomalies into cash flow and discount rate news. Common patterns emerge across the five factor portfolios and their mean variance efficient (MVE) combination. Whereas discount rate news predominates in market returns, systematic cash flow news drives the returns of anomaly portfolios and their MVE combination with the market portfolio. Anomaly cash flow and discount rate shocks are largely uncorrelated with market cash flow and discount rate shocks and with business cycle fluctuations.
Salary history bans forbid employers from asking job candidates to disclose their salaries. However, applicants can still volunteer this information. Our theoretical model predicts the effect of these laws varies by how workers comply. Our survey of Americans in the labor force finds candidates fall into three compliance types: 25% always disclose their salary whether asked or not, 17% never disclose, and 58% comply with the ban (disclosing only when asked). Importantly, compliance type varies by demographics (e.g.
Objectives:
To examine whether and how step-down unit admission after ICU discharge affects patient outcomes.
Design:
Retrospective study using an instrumental variable approach to remove potential biases from unobserved differences in illness severity for patients admitted to the step-down unit after ICU discharge.
Setting:
Ten hospitals in an integrated healthcare delivery system in Northern California.
Patients:
Objectives:
To examine whether and how step-down unit admission after ICU discharge affects patient outcomes.
Design:
Retrospective study using an instrumental variable approach to remove potential biases from unobserved differences in illness severity for patients admitted to the step-down unit after ICU discharge.
Setting:
Ten hospitals in an integrated healthcare delivery system in Northern California.
Patients:
How do ethical arguments affect AI adoption in business? We randomly expose business decision-makers to arguments used in AI fairness activism. Arguments emphasizing the inescapability of algorithmic bias lead managers to abandon AI for manual review by humans and report greater expectations about lawsuits and negative PR. These effects persist even when AI lowers gender and racial disparities, and when engineering investments to address AI fairness are feasible. Emphasis on status quo comparisons yields opposite effects.
How do ethical arguments affect AI adoption in business? We randomly expose business decision-makers to arguments used in AI fairness activism. Arguments emphasizing the inescapability of algorithmic bias lead managers to abandon AI for manual review by humans and report greater expectations about lawsuits and negative PR. These effects persist even when AI lowers gender and racial disparities, and when engineering investments to address AI fairness are feasible. Emphasis on status quo comparisons yields opposite effects.
This article presents new conceptual and managerial insights about consumer experiences of positive emotions in the marketplace and how to engineer these emotional experiences for business purposes. Specifically, we provide an in-depth conceptual analysis of three positive emotions that are of high relevance for marketers: (1) consumer pride, (2) consumer excitement, and (3) consumer relaxation.
Well-educated and prosperous, Asians are called the “model minority” in the United States. However, they appear disproportionately underrepresented in leadership positions, a problem known as the “bamboo ceiling.” It remains unclear why this problem exists and whether it applies to all Asians or only particular Asian subgroups. To investigate the mechanisms and scope of the problem, we compared the leadership attainment of the two largest Asian subgroups in the United States: East Asians (e.g., Chinese) and South Asians (e.g., Indians).
Women participate in cultural activities such as art, music, and literature at higher rates than men, yet as creative professionals, their career achievements tend to lag behind men’s. Scholars interested in this puzzle have largely focused on gender bias in the evaluations of audiences and other gatekeepers. In this paper, we identify differences in the relative novelty of creative products, which we argue are shaped by the conditions under which male and female artists produce their work.
China and the United States are the two largest emitters of greenhouse gases, making them pivotal players in global climate negotiations. Within the coming decade, however, India is set to become the most important counterpart to the United States, as it overtakes China as the country with the most at stake depending on the type of global burden-sharing agreements reached, thus becoming a member of the ‘Climate G2’.
We estimate the benefit of life-extending medical treatments to life insurance companies. Our main insight is that life insurance companies have a direct benefit from such treatments as they lower the insurer's liabilities by pushing the death benefit further into the future and raise future premium income. We apply this insight to immunotherapy, treatments associated with durable gains in survival rates for a growing number of cancer patients. We estimate that the life insurance sector's aggregate benefit from FDA approved immunotherapies is $9.8 billion a year.
We identify flight-to-safety (FTS) days for 23 countries using only stock and bond returns and a model averaging approach. FTS days comprise less than 2% of the sample, and are associated with a 2.7% average bond-equity return differential and significant flows out of equity funds and into government bond and money market funds. FTS represents flights to both quality and liquidity in international equity markets, but mainly a flight-to-quality in the US corporate bond market.
The dominant cultural valuation of stress is that it is “bad for me.” This valuation leads to regulatory goals of reducing or avoiding stress. In this article, we propose an alternative approach—stress optimization—which integrates theory and research on stress mindset (e.g., Crum, Salovey, & Achor, 2013) and stress reappraisal (e.g., Jamieson, Mendes, Blackstock, & Schmader, 2010) interventions. We further integrate these theories with the extended process model of emotion regulation (Gross, 2015).
Technologies are becoming increasingly autonomous, able to make decisions and complete tasks on behalf of consumers. Virtual assistants already take care of grocery shopping by replenishing used up ingredients while cooking machines prepare these ingredients and implement recipes. In the future, consumers will be able to delegate substantial parts of the shopping process to autonomous shopping systems.
Technological advances have resulted in a hyperconnected world, requiring a reassessment of branding research from the perspectives of firms, consumers, and society. Brands are shifting away from single ownership to shared ownership, as heightened access to information and people is allowing more stakeholders to cocreate brand meanings and experiences alongside traditional brand owners and managers.
This research examines how drip pricing--a strategy whereby a firm advertises only part of a product's price upfront and then reveals additional mandatory or optional fees/surcharges as the consumer proceeds through the buying process--affects consumer choice and satisfaction. Across six studies, we find that when optional surcharges are dripped (vs. revealed upfront) consumers are more likely to initially select a lower base priced option which, after surcharges are included, is often more expensive than the alternative.
Consumer research often fails to have broad impact on members of our own discipline, on adjacent disciplines studying related phenomena, and on relevant stakeholders who stand to benefit from the knowledge created by our rigorous research. We propose that impact is limited because consumer researchers have adhered to a set of implicit boundaries or defaults regarding what we study, why we study it, and how we do so. We identify these boundaries and describe how they can be challenged.
Consumer research often fails to have broad impact on members of our own discipline, on adjacent disciplines studying related phenomena, and on relevant stakeholders who stand to benefit from the knowledge created by our rigorous research. We propose that impact is limited because consumer researchers have adhered to a set of implicit boundaries or defaults regarding what we study, why we study it, and how we do so. We identify these boundaries and describe how they can be challenged.
What does utility maximization subject to a budget constraint imply for intertemporal choice under uncertainty? Assuming consumers face a two period consumption-portfolio problem where asset markets are incomplete, we address this question following both the standard local infinitesimal and finite data approaches. To focus on the separate roles of time and risk preferences, individuals maximize KPS (Kreps-Porteus-Selden) preferences. The consumption-portfolio problem is decomposed into a one period portfolio problem and a two period certainty consumption-saving problem.
Qualitative research is often used by marketers to develop new brand positionings. This case illustrates how two sequentially applied qualitative approaches were used to generate positionings for a pet food brand. The methods included psychologically oriented focus groups and anthropologically informed ethnographies. When implemented independently by a single market research company, the two approaches inspired highly distinctive brand positionings.
Marketing research relies on individual-level estimates to understand the rich heterogeneity of consumers, firms, and products. While much of the literature focuses on capturing static cross-sectional heterogeneity, little research has been done on modeling dynamic heterogeneity, or the heterogeneous evolution of individual-level model parameters. In this work, the authors propose a novel framework for capturing the dynamics of heterogeneity, using individual-level, latent, Bayesian nonparametric Gaussian processes.