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.
Ernst & Young hosted this 2007 roundtable with the goal of providing a better understanding of the challenges and best practices of using valuation analysis to support executive decisions. Panelists included Richard Ruback of the Harvard Business School, Trevor Harris of Morgan Stanley, Aileen Stockburger of Johnson & Johnson, Dino Mauricio of General Electric, Christian Roch of BNP Paribas, Ken Meyers of Siemens Corporation, and Charles Kantor of Lehman Brothers. Jeff Green of Ernst & Young moderated.
The Tuscan Lifestyles case (Mason, 2003) offers a simple twist on the standard view of how to value a newly acquired customer, highlighting how standard retention-based approaches to the calculation of expected customer lifetime value (CLV) are not applicable in a noncontractual setting.
Recent deliberations by both the International Accounting Standards Board (IASB) and the Financial Accounting Standard Board (FASB) in the United States have focused on how fair values of assets and liabilities should be measured. The issue of when, rather than how, fair value measurement should be applied is still far from resolved, however.
To study the effects of new information technologies (IT) on productivity, we have assembled a unique data set on plants in one narrowly defined industry?valve manufacturing?and analyze several plant-level mechanisms through which IT could promote productivity growth. The empirical analysis reveals three main results. First, plants that adopt new IT-enhanced equipment also shift their business strategies by producing more customized valve products.
This paper proposes a simple back testing procedure that is shown to dramatically improve a panel data model's ability to produce out of sample forecasts. Here the procedure is used to forecast mutual fund alphas. Using monthly data with an OLS model it has been difficult to consistently predict which portfolio managers will produce above market returns for their investors. This paper provides empirical evidence that sorting on the estimated alphas populates the top and bottom deciles not with the best and worst funds, but with those having the greatest estimation error.
We integrate the financial architecture into the theory of investment by building on two strands of literature: irreversible investment and debt pricing/capital structure. We extend the real options approach to investment, pioneered by Michael J. Brennan and Eduardo S. Schwartz (1985) and Robert McDonald and Daniel Siegel (1986), to allow for capital structure decisions under strategic debt service. We also draw insights from corporate debt pricing/capital structure literature, which focuses on leverage and security pricing after investment has already been made (Robert C.
Given the cross-sectional and temporal variation in their liquidity, emerging equity markets provide an ideal setting to examine the impact of liquidity on expected returns. Our main liquidity measure is a transformation of the proportion of zero daily firm returns, averaged over the month. We find that it significantly predicts future returns, whereas alternative measures such as turnover do not.
We investigated two types of metaphors in stock market commentary. Agent metaphors describe price trajectories as volitional actions, whereas object metaphors describe them as movements of inanimate objects. Study 1 examined the consequences of commentators? metaphors for their investor audience. Agent metaphors, compared with object metaphors and non-metaphoric descriptions, caused investors to expect price trend continuance. The remaining studies examined preconditions, the features of a price trend that evoke agent vs. object metaphors.
We investigated two types of metaphors in stock market commentary. Agent metaphors describe price trajectories as volitional actions, whereas object metaphors describe them as movements of inanimate objects. Study 1 examined the consequences of commentators? metaphors for their investor audience. Agent metaphors, compared with object metaphors and non-metaphoric descriptions, caused investors to expect price trend continuance. The remaining studies examined preconditions, the features of a price trend that evoke agent vs. object metaphors.
This paper examines model specification issues and estimates diffusive and jump risk premia using S&P futures option prices from 1987 to 2003. We first develop a time series test to detect the presence of jumps in volatility, and find strong evidence in support of their presence. Next, using the cross section of option prices, we find strong evidence for jumps in prices and modest evidence for jumps in volatility based on model fit. The evidence points toward economically and statistically significant jump risk premia, which are important for understanding option returns.
This paper examines model specification issues and estimates diffusive and jump risk premia using S&P futures option prices from 1987 to 2003. We first develop a time series test to detect the presence of jumps in volatility, and find strong evidence in support of their presence. Next, using the cross section of option prices, we find strong evidence for jumps in prices and modest evidence for jumps in volatility based on model fit. The evidence points toward economically and statistically significant jump risk premia, which are important for understanding option returns.
Bias in the market for news is well-documented. Recent research in economics explains the phenomenon by assuming that consumers want to read (watch) news that is consistent with their tastes or prior beliefs rather than the truth. The present paper builds on this idea but recognizes that (i) besides "biased" consumers, there are also "conscientious" consumers whose sole interest is in discovering the truth, and (ii) consistent with reality, media bias is constrained by the truth. These two factors were expected to limit media bias in a competitive setting. Our results reveal the opposite.
In this note we present algorithms that compute, exactly or approximately, time-dependent waiting time tail probabilities and the time-dependent expected waiting time in M(t)/M/s(t) queuing systems.
In most marketing experiments, managerial decisions are not based directly on the estimates of the parameters, but rather on functions of these estimates. For example, many managerial decisions are driven by whether or not a feature is valued more than the price the consumer will be asked to pay. In other cases, some managerial decisions are weighed more heavily than others. The standard measures used to evaluate experimental designs (e.g., A-efficiency or D-efficiency) do not accommodate these phenomena.
Explicit presence of reorganization in addition to liquidation leads to conflicts of interest between borrowers and lenders. In the first-best outcome, reorganization adds value to both parties via higher debt capacity, lower credit spreads, and improved overall firm value. If control of the ex ante reorganization timing and the ex post decision to liquidate is given to borrowers, most of the benefits are appropriated by borrowers ex post. Lenders can restore the first-best outcome by seizing this control or by the ex post transfer of control rights.
Explicit presence of reorganization in addition to liquidation leads to conflicts of interest between borrowers and lenders. In the first-best outcome, reorganization adds value to both parties via higher debt capacity, lower credit spreads, and improved overall firm value. If control of the ex ante reorganization timing and the ex post decision to liquidate is given to borrowers, most of the benefits are appropriated by borrowers ex post. Lenders can restore the first-best outcome by seizing this control or by the ex post transfer of control rights.
Five experiments investigated how the possession and experience of power affects the initiation of competitive interaction. In Experiments 1a and 1b, high-power individuals displayed a greater propensity to initiate a negotiation than did low-power individuals. Three additional experiments showed that power increased the likelihood of making the first move in a variety of competitive interactions.
Polyhedral methods for choice-based conjoint analysis provide a means to adapt choice-based questions at the individual-respondent level and provide an alternative means to estimate partworths when there are relatively few questions per respondent as in a web-based questionnaire. However, these methods are deterministic and are susceptible to the propagation of response errors. They also assume, implicitly, a uniform prior on the partworths.
We consider a family of N items that are produced in, or obtained from, the same production facility. Demands are deterministic for each item and each period within a given horizon of T periods. If in a given period an order is placed, setup costs are incurred. The aggregate order size is constrained by a capacity limit. The objective is to find a lot-sizing strategy that satisfies the demands for all items over the entire horizon without backlogging, and that minimizes the sum of inventory-carrying costs, fixed-order costs, and variable-order costs.
The article explores the history of the U.S. Institutional Review Board (IRB) system and its penetration into local institutions. The author found that the Code of Federal Regulations Governing the Protection of Human Subjects in Research develops categories of risk for which various types of medical research are required. In this regard, research or reviews identified with the highest level of assessed risk can only be considered by a convened panel of IRB members.
In the present investigation, we build on prior research by examining perceptions of choices and their outcomes as a factor of independent and interdependent self–construals, the identity of the chooser, and the recipient of the choice. Results from two experiments suggest that independent selves prefer to be both chooser and choice recipient, whereas interdependent selves are more amenable to choosing for others and having others choose on their behalf.
Results from two groups of biculturals (Hong Kong undergraduates, Chinese Americans) and a group of European Americans in two studies showed that in the presence of applicable cues of a culture, individuals with expert knowledge in the culture spontaneously make inferences about the culture's moral values, producing a Stroop-like effect. Although both biculturals and European Americans made spontaneous cultural inferences from American cultural cues, only biculturals made spontaneous inferences from Chinese cultural cues.
We examine the predictive power of the dividend yield for forecasting future excess returns, cashflows, and interest rates. The ability of the dividend yield to predict excess returns is best visible at short horizons with the short rate as an additional regressor. At short horizons, the short rate strongly negatively predicts excess returns, while at long horizons, the predictive power of the dividend yield is weak. These results are robust in international data and are not due to lack of power.
We consider stock markets in 20 countries to investigate whether the accrual anomaly (Sloan 1996), characterized by U.S. stock prices overweighting the role of accrual persistence, is a local manifestation of a global phenomenon. We explore whether the occurrence of the anomaly is related to country differences in accounting and institutional structures, and examine alternative explanations for its occurrence. We find stock prices overweight accruals in general, with accruals overweighting occurring in countries with a common law relative to a code law tradition.
As different activities cannot be measured or communicated with the same precision, accounting information is often only a partial and unbalanced reflection of the fundamental economics, emphasizing certain aspects of the underlying operations while disregarding others. We highlight this inherent imbalance in information as the source of an interaction between corporate operating and discretionary disclosure strategies, and thereby also as an important determinant of the information acquisition strategy.
This paper examines uncovered interest rate parity (UIRP) and the expectations hypotheses of the term structure (EHTS) at both short and long horizons. The statistical evidence against UIRP is mixed and is currency- not horizon-dependent. Economically, the deviations from UIRP are less pronounced than previously documented. The evidence against the EHTS is statistically more uniform, but, economically, actual spreads and theoretical spreads (spreads constructed under the null of the EHTS) do not behave very differently, especially at long horizons.
The authors propose that individual differences in assertiveness play a critical role in perceptions about leaders. In contrast to prior work that focused on linear effects, the authors argue that individuals seen either as markedly low in assertiveness or as high in assertiveness are generally appraised as less effective leaders. Moreover, the authors claim that observers' perceptions of leaders as having too much or too little assertiveness are widespread.
The first step in any research is to decide what to study. Choosing the right question is essential for producing relevant knowledge. This is not to say that relevance should be subordinate to rigour. They are both important. A relevant question which is analysed rigorously produces valid knowledge that both advances theory and informs practice. A rigorously performed study on an irrelevant question may advance theory but does not inform practice.
Four experiments and a correlational study explored the relationship between power and perspective taking. In Experiment 1, participants primed with high power were more likely than those primed with low power to draw an E on their forehead in a self-oriented direction, demonstrating less of an inclination to spontaneously adopt another person's visual perspective.
This paper uses an analytical model to examine when it makes sense to provide incentives to innovators to adopt a new product. The model allows for separate segments of innovators and imitators, each of which follows a Bass-type diffusion process. Interestingly "seeding" the market is optimal for a limited range of situations and these do not appear to include those where there is a downturn in sales (chasm) as sales move from the first to the second segment.
The comprehensive survey reported here allowed analysis of how senior U.S. financial executives make decisions related to performance measurement and voluntary disclosure. Chief financial officers were asked what earnings benchmarks they cared about and which factors motivated executives to exercise discretion — even sacrifice economic value — to deliver earnings. These issues are crucially linked to stock market performance. The results show that the destruction of shareholder value through legal means is pervasive, perhaps even a routine way of doing business.
We consider organizations that optimally choose the level of adaptation to a changing environment when coordination among specialized tasks is a concern. Adaptive organizations provide employees with flexibility to tailor their tasks to local information. Coordination is maintained by limiting specialization and improving communication. Alternatively, by letting employees stick to some pre-agreed action plan, organizations can ensure coordination without communication, regardless of the extent of specialization.
We consider organizations that optimally choose the level of adaptation to a changing environment when coordination among specialized tasks is a concern. Adaptive organizations provide employees with flexibility to tailor their tasks to local information. Coordination is maintained by limiting specialization and improving communication. Alternatively, by letting employees stick to some pre-agreed action plan, organizations can ensure coordination without communication, regardless of the extent of specialization.
We characterize supply chain settings in which perfect coordination can be achieved with simple wholesale pricing schemes: either retailer-specific constant unit wholesale prices or retailer-specific volume discount schemes. We confine ourselves to two-echelon supply chains with a single supplier servicing a network of retailers who compete with each other by selecting sales quantities.
Weak public institutions, including high levels of corruption, characterize many developing countries. We demonstrate that this feature has important implications for the design of monetary policymaking institutions. We find that a pegged exchange rate or dollarization, while sometimes prescribed as a solution to the credibility problem, is typically not appropriate for countries with poor institutions. Such an arrangement is inferior to a Rogoff-style conservative central banker, whose optimal degree of conservatism is proportional to the quality of institutions.
Consider a make-to-order manufacturer that offers multiple products to a market of price and delay sensitive users.
By comparing reality to what might have been, counterfactuals promote a relational processing style characterized by a tendency to consider relationships and associations among a set of stimuli. As such, counterfactual mind-sets were expected to improve performance on tasks involving the consideration of relationships and associations but to impair performance on tasks requiring novel ideas that are uninfluenced by salient associations. The authors conducted several experiments to test this hypothesis.
Not all first impressions have equal longevity. Which kinds of impression have the greatest mobility--downward and upward--over the course of acquaintanceships? Previous research has indicated that first impressions of extraversion (E) have greater longitudinal stability than first impressions of other Big Five traits: agreeableness (A), conscientiousness (C), emotional stability (ES), and openness (O). In this article, we propose an inferential account of E impression stability.
Information processing research published in the Journal of Consumer Research has produced theoretical advances in our understanding of consumer behavior. This article highlights two themes that have emerged in consumer research over the past 15 years. These are the interplay between motivation and cognition and the impact of implicit processes on consumer behavior. We examine these themes in three core areas of information processing research—memory, affect, and persuasion.
Event sponsors often do not receive proper credit for their efforts. This issue was examined in a field study involving over 300 baseball fans attending minor league games during the summer season. Signal detection analyses reveal that, even among such sports fans, the ability to correctly discriminate actual official sponsors of the home team from matched foils, although above chance, was rather poor. Consistent with recent laboratory findings, sponsor identification responses were further found to be heavily influenced by the mere plausibility of the brand as a potential sponsor.
Event sponsors often do not receive proper credit for their efforts. This issue was examined in a field study involving over 300 baseball fans attending minor league games during the summer season. Signal detection analyses reveal that, even among such sports fans, the ability to correctly discriminate actual official sponsors of the home team from matched foils, although above chance, was rather poor. Consistent with recent laboratory findings, sponsor identification responses were further found to be heavily influenced by the mere plausibility of the brand as a potential sponsor.
New product development is integral to marketing. There are questions, however, regarding the extent to which new products are good and for whom they are good. While benefits may be obvious for manufacturers, sellers, and users of any particular product, stakeholders beyond the transaction and direct usage of said product may receive no benefits and perhaps may be harmed by new products.
We consider the problem of estimating convex boundaries from blurred and noisy observations. In our model, the convolution of an intensity function f is observed with additive Gaussian white noise. The function f is assumed to have convex support G whose boundary is to be recovered.
Counter to the "start high, end high" effect of anchors in individual judgments and dyadic negotiations, 6 studies using a diverse set of methodologies document how and why, in the social setting of auctions, lower starting prices result in higher final prices. Three processes contribute to this effect. First, lower starting prices reduce barriers to entry, which increase traffic and generate higher final prices. Second, lower starting prices entice bidders to invest time and energy (creating sunk costs) and, consequently, escalate their commitments.