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.
To explore if, when, and how intentionally corporate officers conceal negative organizational outcomes from shareholders, we used computer-assisted content analysis of over 1,000 president's letters contained in annual reports to shareholders. Results suggest that outside directors, large institutional investors, and accountants limit such concealment, but small institutional investors and outside directors who are shareholders prompt it. Low disclosure is associated with subsequent selling of stock by top officers and outside directors.
Faced with turbulent national and international environments, entire U.S. industries-most notably steel and automobiles-have revealed a distinct propensity to overlook radically new types of competitors, cling to traditional technologies, and remain mired in similar, yet outdated, strategic postures. In this article, we ascribe the adaptive failures of entire industries not only to the micro-cultures of single organizations, but also to what we term inter-organizational "macro-cultures"-relatively idiosyncratic beliefs that are shared by managers across organizations.
This goal of this paper is to establish a research agenda that will lead to a stream of research that closes the gap between actual and normative strategic managerial decision making. We start by distinguishing strategic managerial decision making (choices) from other choices. Next, we propose a conceptual model of how managers make strategic decisions that is consistent with the observed gap between actual and normative decision making.
Polling system models are extensively used to model a large variety of computer and communication networks as well as production and service systems in which multiple customer classes or a number of distinct items compete for the capacity of a common server or production facility. In this paper we describe an efficient approximation method for the steady state distributions of the queue sizes and waiting times. This method is highly accurate as demonstrated by an extensive numerical study.
Under fairly general conditions, the article derives the equilibrium price schedule determined by the bids and offers in an open limit order book.
The impact of item-by-item information accessing on uncertainty reduction is studied under self-selected and researcher-constrained information accessing. Study 1 showed that, at both the aggregate and the individual level, subjective uncertainty reduction assumes several distinct patterns, with the dominant pattern conforming to an accelerating or linear power function. Study 2 revealed that different subjective-uncertainty-reduction patterns tend to be associated with within-options versus within-properties searches. Implications of the findings and the procedure are discussed.
The authors examine how new brand entries affect consumers' consideration sets. A within-subject longitudinal experiment examines several entry positions into existing markets. The results suggest that new brand entries produce changes in consideration sets toward dominating, compromise, and assimilated brands, away from extreme brands in two-brand markets, and toward dominating and away from extreme brands in eight-brand markets. These results are confirmed by a second experiment that utilizes a between-subject design and markets with six existing brands.
The widespread belief in the intuitive relationship between quality, customer satisfaction and economic returns, as well as the growing frustration with attempts to improve quality, serve to underscore the importance of analytical and empirical work increasing understanding of customer satisfaction and how it relates to economic returns. Firms that actually achieve high customer satisfaction also enjoy superior economic returns.
In this study we investigate several hypotheses relating strategic forecasting to market segment selection and firm performance. In the context of a strategic marketing simulation, subjects in 14 competitive industries made strategic forecasts for market segment size and benchmark prices.
The objective of governments is to efficiently provide essential services and infrastructure to their jurisdictions at a competitive tax rate within the constraint of a balanced budget. In recent years, several states have found it difficult to maintain this standard. This article examines the nature of the problem in the overlapping jurisdictions of New York City and New York State. Specifically, it explains the nature of projected budget gaps that have emerged in New York, and describes how the two New Yorks' political leaders have managed their budgets in recent years.
This paper examines predictions of a life-cycle simulation model—in which individuals face uncertainty regarding their length of life, earnings, and out-of-pocket medical expenditures, and imperfect insurance and lending markets—for individual and aggregate wealth accumulation. Relative to life-cycle or buffer-stock alternatives, our augmented life-cycle model better matches a variety of features of U.S.
This paper examines predictions of a life-cycle simulation model—in which individuals face uncertainty regarding their length of life, earnings, and out-of-pocket medical expenditures, and imperfect insurance and lending markets—for individual and aggregate wealth accumulation. Relative to life-cycle or buffer-stock alternatives, our augmented life-cycle model better matches a variety of features of U.S.
This study examines how advertising budget setting, framed as a prisoner's dilemma, is affected by information on the competitive situation and characteristics of the decision maker. Hypotheses are tested using experiments in which subjects set advertising budgets. Results indicate that subjects were generally competitive, but also based their strategy selections on what they expected their opponents to do, what their opponents did last time, whether the competitive relationship was expected to continue, market shares, and whether the subject's profit objectives were short- or long-term.
In this paper, the author outlines what he believes to be causes of why many people do not save. Much of the research examining levels of consumption, saving, and wealth, as well as their responsiveness to policy, has been done using a life-cycle model with the simplifying assumption of perfect certainty. More recently, a line of inquiry has examined the effects of uncertainty on saving, generally in the context of highly stylized models. This research has shown that, in these models, uninsured earnings uncertainty can alter optimal saving behavior in a variety of important ways.
In this paper, the author outlines what he believes to be causes of why many people do not save. Much of the research examining levels of consumption, saving, and wealth, as well as their responsiveness to policy, has been done using a life-cycle model with the simplifying assumption of perfect certainty. More recently, a line of inquiry has examined the effects of uncertainty on saving, generally in the context of highly stylized models. This research has shown that, in these models, uninsured earnings uncertainty can alter optimal saving behavior in a variety of important ways.
We consider Markovian GSMPs (generalized semi-Markov processes) in which the rates of events are subject to control. A control is monotone if the rate of one event is increasing or decreasing in the number of occurrences of other events. We give general conditions for the existence of monotone optimal controls. The conditions are functional properties for the one-step cost functions and, more importantly, structural properties for the GSMP. The main conditions on costs are submodularity or supermodularity with respect to pairs of events.
Over the last few years, the Italian government has intensified its privatization program of state-owned industries. Since 1989, it has privatized the banking and food industries and will begin work on the telecom and insurance industries in late 1994. Paolo Savona, the Minister of Industry, has been in part responsible for these reforms.
We examine associations between accounting measures of earnings and stock returns in Japan over varying window lengths and compare them to those for the United States. Our results are consistent with the view that Japanese investors utilize less accounting information in their pricing of equities than do their U.S. counterparts. This was particularly evident in the 'boom' period of the mid to late 1980s when the fundamental values conveyed by accounting measures appear to have been largely ignored.
This note considers a principal–multi-agent model of a firm subject to adverse selection. With just the usual optimal (incentive-constrained) contracts being offered, there exist multiple (Bayes–Nash) equilibria in the agents' subgame. Moreover, from the agents' perspective, there exists an equilibrium that Pareto-dominates the equilibrium desired by the principal. By exploiting the structure of the model, this note develops a new approach for eliminating unwanted equilibria (while retaining the desired equilibrium).
This paper examines time-series properties of exchange rate changes, the forward premium and the forward bias in the context of a variant of Svensson's cash-in-advance model. The model is solved and simulated using realistic forcing processes whose law of motion is estimated from U.S.-Japan data and then approximated by a Markov chain. Although method of moments estimation shows that the over-identifying restrictions implied by the model are not rejected, it fails dramatically in producing a sufficiently variable risk premium on forward market speculation.
We show that valuing performance is equivalent to valuing a particular contingent claim on an index portfolio. In general the form of the contingent claim is not known and must be estimated. We suggest approximating the contingent claim by a series of options. We illustrate the use of our method by evaluating the performance of 130 mutual funds during the period 1968-82. We find that the relative performance rank of a fund is rather insensitive to the choice of the index, even though the actual value of the services of the portfolio manager depends on the choice of the index.
The article focuses on investment behavior using tax reforms as natural experiments. Economists and policymakers have long been interested in measuring the effects of changes in the returns to and costs of business fixed investment. That interest reflects both theoretical and practical concerns which have stimulated a large body of empirical research using aggregate and micro-level data. This literature has reached few unambiguous conclusions.
Affluent investor mutual fund decisions are probed. Several different investor profiles are developed from data on approximately 300 affluent investors. These investor types differ in sources of information regarding mutual fund investments, particularly the use of financial advisers, and in the selection criteria employed for mutual fund purchases. In addition, they have distinguishable mutual fund behavior and demographic characteristics. Specific implications for financial services firms are developed.
We investigate the dependence induced among multiple Markov chains when they are simulated in parallel using a shared Poisson stream of potential event occurrences. One expects this dependence to facilitate comparisons among systems; our results support this intuition. We give conditions on the transition structure of the individual chains implying that the coupled process is an associated Markov chain. Association implies that variance is reduced in comparing increasing functions of the chains, relative to independent simulations, through a routine argument.
The nature of competitive equilibrium is investigated for brands competing in a multi-attribute product space when consumer preferences for product attributes follow nonuniform distributions. Subgame-perfect equilibria are established in a 2-stage game, where firms choose positions in the first stage and prices in the 2nd stage. Two types of entry scenarios are investigated. In the first, the number of brands is given exogenously, and all of them choose positions simultaneously.
International differences in general, and cultural differences in particular, exert profound influence on what people buy. In modeling market response, highly visible international differences in purchase behavior seem to lead to an assumption by management scientists that there are large parallel international differences in market response to such things as price and advertising.
The authors argue that attribution patterns reflect implicit theories acquired from induction and socialization and hence differentially distributed across human cultures. In particular, the authors tested the hypothesis that dispositionalism in attribution for behavior reflects a theory of social behavior more widespread in individualist than collectivist cultures. Study 1 demonstrated that causal perceptions of social events but not physical events differed between American and Chinese students.
We show for the general dynamic lot sizing model how minimal forecast horizons may be detected by a slight adaptation of an earlier 0(n log n) or 0(n) forward solution method for the model. A detailed numerical study indicates that minimal forecast horizons tend to be small, that is, include a small number of orders.
In many industries, managers face the problem of selling a given stock of items by a deadline. We investigate the problem of dynamically pricing such inventories when demand is price sensitive and stochastic and the firm's objective is to maximize expected revenues. Examples that fit this framework include retailers selling fashion and seasonal goods and the travel and leisure industry, which markets space such as seats on airline flights, cabins on vacation cruises, and rooms in hotels that become worthless if not sold by a specific time.
Analyzes the potential of reverse mortgages to increase the income and liquid wealth of the elderly by identifying households with relatively high levels of housing equity. Definition; Review of related literature; Descriptive statistics; Reverse mortgage simulations; Barriers to acceptance of reverse mortgages.
This article examines the tax-compliance game between taxpayers, a tax-collecting agency, and third-party tax-return prepares. In our model, taxpayers are uncertain about their taxable income and may hire tax practitioners to reduce tax uncertainty. We examine the viability of tax practitioners as a signaling device (taking into account the effects on the behavior of the tax-collecting agency) and investigate the desirability of encouraging (or discouraging) the use of tax practitioners via the use of alternative tax-crediting rules.
A recently published meta-analysis of the impact of strategic planning on financial performance omitted a major study of corporate planning practice in Fortune 500 manufacturing firms. This article briefly reviews that study in light of the results of the meta-analysis. Additional analysis examines performance and firm survival over a longer time period than in the original work. The overall conclusion is that a small but positive relationship between strategic planning and performance exists, and persists.
A recently published meta-analysis of the impact of strategic planning on financial performance omitted a major study of corporate planning practice in Fortune 500 manufacturing firms. This article briefly reviews that study in light of the results of the meta-analysis. Additional analysis examines performance and firm survival over a longer time period than in the original work. The overall conclusion is that a small but positive relationship between strategic planning and performance exists, and persists.
Presents data about which dimensions led to greater optimism with more fundamentalism. Three dimensions of explanatory style; Differences among the fundamentalists, moderates and liberals; Factors responsible for greater optimism among fundamentalists.
We address the Joint Replenishment Problem (JRP) where, in the presence of joint setup costs, dynamic lot sizing schedules need to be determined for m items over a planning horizon of N periods, with general time-varying cost and demand parameters. We develop a new, so-called, partitioning heuristic for this problem, which partitions the complete horizon of N periods into several relatively small intervals, specifies an associated joint replenishment problem for each of these, and solves them via a new, efficient branch-and-bound method.
Most models of multilevel production and distribution systems assume unlimited production capacity at each site. When capacity limits are introduced, an ineffective policy may lead to increasingly large order backlogs: The stability of the system becomes an issue. In this paper, we examine the stability of a multi-echelon system in which each node has limited production capacity and operates under a base-stock policy.
In this study we compare the value relevance of accounting measures for U.S. and German firms matched on industry and firm size, and evaluate the incremental informativeness of earnings adjusted on the basis of a formula proposed by analysts.
The mean-variance model for portfolio selection requires estimates of many parameters. This paper investigates the effect of errors in parameter estimates on the results of mean-variance analysis. Using a small amount of historical data to estimate parameters exposes the model to estimation errors. However, using a long time horizon to estimate parameters increases the possibility of nonstationarity in the parameters. This paper investigates the tradeoff between estimation error and stationarity. A simulation study shows that the effects of estimation error can be surprisingly large.
We find support for a negative relation between conditional expected monthly return and conditional variance of monthly return, using a GARCH-M model modified by allowing (1) seasonal patterns in volatility, (2) positive and negative innovations to returns having different impacts on conditional volatility, and (3) nominal interest rates to predict conditional variance. Using the modified GARCH-M model, we also show that monthly conditional volatility may not be as persistent as was thought.
Why do some new ventures succeed while others fail? What is the essence of entrepreneurship? Who is most likely to become a successful entrepreneur and why? How do entrepreneurs make decisions? What market, regulatory, and organizational environments foster the most successful entrepreneurial activities? Entrepreneurship research is plagued by these and other fundamental unanswered questions, for which there does not exist a cohesive explanatory, predictive, or normative theory.
By a filtered Monte Carlo estimator we mean one whose constituent parts—summands or integral increments—are conditioned on an increasing family of σ-fields. Unbiased estimators of this type are suggested by compensator identities. Replacing a point-process integrator with its intensity gives rise to one class of examples; exploiting Levy's formula gives rise to another.
Investigates the explanatory style of religious groups representing fundamentalist, moderate and liberal views. Reason for the optimism of fundamentalist individuals; Causes of the optimism differences among fundamentalists, moderates and liberals; Impact of religious hope on individuals.
In the standard analysis of overlapping generations economies with gifts from children to parents, each generation takes the actions of other generations as given. The resulting equilibrium is dynamically inefficient. In reality, however, parents realize that children will respond to higher parental saving by reducing gifts. For a broad class of gift economies, this implicit tax on saving pushes the equilibrium to dynamic efficiency.
Money managers select weights of managed portfolios to enhance their reputation in the spot market for their services, inevitably using their actions to signal their quality. We develop a two-asset signalling model of money managers. A unique screening equilibrium and (under certain parameter configurations) a host of pooling equilibria survive the Cho-Kreps Intuitive Criterion. In all the equilibria managers behave more aggressively than they would in the absence of the signalling motive, exaggerating their position in the risky asset.
In this paper we develop a model for a capacitated production/distribution network of general (but acyclic) topology with a general bill of materials, as considered in MRP (Material Requirement Planning) or DRP (Distribution Requirement Planning) systems. This model assumes stationary, deterministic demand rates and a standard stationary cost structure; it is a generalization of the uncapacitated model treated in the seminal papers of Maxwell and Muckstadt (1985) and Roundy (1986).
This research proposes that negotiators consider each other's payoffs in their evaluation of potential settlements beyond the level necessary to maintain the bargaining relationship. We further hypothesize that the way in which negotiators weight their opponents' payoffs, relative to their own, is a function of characteristics of the relationship and of the bargainers' personalities. Specifically, we consider liking of the other party, payoff expectations, satisfaction with past settlements, the likelihood of future negotiations, egocentricity, and power orientation.
This paper examines the attributes that consumers use when making product similarity judgments and their effect on similarity scaling. Previous research suggests that concrete brands are judged using dichotomous features while more abstract product categories are judged using continuous dimensions. This, in turn, suggests that the appropriateness of spatial scaling increases relative to tree scaling as one moves from brands to product categories. The results of two studies support an increase in the fit of spaces relative to trees from brands to categories.
Given a parametric family of regenerative processes on a common probability space, we investigate when the derivatives (with respect to the parameter) are regenerative. We primarily consider sequences satisfying explicit, Lipschitz recursions, such as the waiting times in many queueing systems, and show that derivatives regenerate together with the original sequence under reasonable monotonicity or continuity assumptions. The inputs to our recursions are i.i.d. or, more generally, governed by a Harris-ergodic Markov chain. For i.i.d.