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.
This paper describes a practical algorithm based on Monte Carlo simulation for the pricing of multi-dimensional American (i.e., continuously exercisable) and Bermudan (i.e., discretely-exercisable) options. The method generates both lower and upper bounds for the Bermudan option price and hence gives valid confidence intervals for the true value. Lower bounds can be generated using any number of primal algorithms.
This paper studies recurrence properties of autoregressive (AR) processes with "super-heavy-tailed" innovations. Specifically, we study the case where the innovations are distributed, roughly speaking, as log-Pareto random variables (i.e. the tail decay is essentially a logarithm raised to some power). We show that these processes exhibit interesting and somewhat surprising behaviour.
The contribution of the feelings-as-information hypothesis to our understanding of the role of affect in judgment and decision making is discussed. Basic principles and regularities in how affective feelings guide judgments and decisions are then identified. Based on these principles and regularities, it is argued that the role of feelings in judgment and decision making may be more adaptive than has been assumed in most academic circles.
This empirical investigation tests the hypothesis that the benefits of personal choosing are restricted to choices made from among attractive alternatives. Findings from vignette and laboratory studies show that, contrary to people's self-predictions, choosers only proved more satisfied than non-choosers when selecting from among liked alternatives. When selecting from among disliked alternatives, the reverse is observed - that is, non-choosers proved more satisfied with the decision outcome than choosers.
The compromise effect denotes the finding that brands gain share when they become the intermediate rather than extreme option in a choice set. Despite the robustness and importance of this phenomenon, choice modelers have neglected to incorporate the compromise effect in formal choice models and to test whether such models outperform the standard value maximization model. In this article, the authors suggest four context-dependent choice models that can conceptually capture the compromise effect.
The compromise effect denotes the finding that brands gain share when they become the intermediate rather than extreme option in a choice set. Despite the robustness and importance of this phenomenon, choice modelers have neglected to incorporate the compromise effect in formal choice models and to test whether such models outperform the standard value maximization model. In this article, the authors suggest four context-dependent choice models that can conceptually capture the compromise effect.
This paper explores the motivations and desirability of off-balance sheet financing of credit card receivables by banks. We explore three related issues: the degree to which securitizations result in the transfer of risk out of the originating bank, the extent to which securitization permits banks to economize on capital by avoiding regulatory minimum capital requirements, and whether banks'' avoidance of minimum capital regulation through securitization with implicit recourse has been undesirable from a regulatory standpoint.
Building on the work of Dhar, Menon, and Maach (2004), this commentary describes how the compromise effect models developed in the work of Kivetz, Netzer, and Srinivasan (2004) can be extended to predict complex (business-to-business) purchase decisions and additional behavioral context effects. The authors clarify their general modeling approach and outline how it applies to choices among solutions (augmented products) and group decision making.
Building on the work of Dhar, Menon, and Maach (2004), this commentary describes how the compromise effect models developed in the work of Kivetz, Netzer, and Srinivasan (2004) can be extended to predict complex (business-to-business) purchase decisions and additional behavioral context effects. The authors clarify their general modeling approach and outline how it applies to choices among solutions (augmented products) and group decision making.
While the goal of OR/MS is to aid decision makers, implementation of published models occurs less frequently than one might hope. However, one area that has been significantly impacted by management science is emergency response systems. Dozens of papers on emergency service management appeared in the OR/MS literature in the 1970s alone, many of which were published in Management Science. Three of these papers won major prizes. More importantly, many of these papers led to the implementation of substantially new policies and practices, particularly in policing and firefighting.
While the goal of OR/MS is to aid decision makers, implementation of published models occurs less frequently than one might hope. However, one area that has been significantly impacted by management science is emergency response systems. Dozens of papers on emergency service management appeared in the OR/MS literature in the 1970s alone, many of which were published in Management Science. Three of these papers won major prizes. More importantly, many of these papers led to the implementation of substantially new policies and practices, particularly in policing and firefighting.
Disputes by their nature involve contentious behavior. If one attributes such behavior to underlying personality traits, these attributions can be quite damning. The current research investigated negative trait attributions and their impact on dispute resolution decisions. We hypothesized that judging one's opponent to be low in agreeableness and high in emotionality (e.g. stubborn and volatile) shifts one's preference towards more formal procedures ? formal in the sense that a third party judge controls the process and outcome.
Disputes by their nature involve contentious behavior. If one attributes such behavior to underlying personality traits, these attributions can be quite damning. The current research investigated negative trait attributions and their impact on dispute resolution decisions. We hypothesized that judging one's opponent to be low in agreeableness and high in emotionality (e.g. stubborn and volatile) shifts one?s preference towards more formal procedures ? formal in the sense that a third party judge controls the process and outcome.
Disputes by their nature involve contentious behavior. If one attributes such behavior to underlying personality traits, these attributions can be quite damning. The current research investigated negative trait attributions and their impact on dispute resolution decisions. We hypothesized that judging one's opponent to be low in agreeableness and high in emotionality (e.g. stubborn and volatile) shifts one?s preference towards more formal procedures ? formal in the sense that a third party judge controls the process and outcome.
This paper presents an approach to modeling workers where human performance has a significant impact on system productivity. Highly technical industries such as semiconductor manufacturing and service industries like banking are relying on fewer but more skilled workers. In these systems, productivity depends on worker availability and organization; therefore, modeling system performance may require accurate representations of individual worker behavior.
We model the trade-off between low-asset risk and low leverage to satisfy preferences for low-risk deposits and apply it to interwar New York City banks. During the 1920s, profitable lending and low costs of raising capital produced increased bank asset risk and increased capital, with no deposit risk change. Differences in the costs of raising equity explain differences in asset risk and capital ratios. In the 1930s, rising deposit default risk led to deposit withdrawals. In response, banks increased riskless assets and cut dividends.
This paper examines transfer pricing in multinational firms when individual divisions face different income tax rates. Assuming that a firm decouples its internal transfer price from the arm's length price used for tax purposes, we analyze the effectiveness of alternative pricing rules under both cost- and market-based transfer pricing. In a tax-free world, Hirshleifer (1956) advocated that the internal transfer price be set equal to the marginal cost of the supplying division.
We analyze the Pareto optimal contracts between lenders and borrowers in a model with asymmetric information. The model generalizes the Rothschild-Stiglitz pure adverse selection problem by including moral hazard. Entrepreneurs with unequal "abilities" borrow to finance alternative investment projects which differ in degree of risk and productivity. We determine the endogenous distribution of projects as functions of the amount of loanable funds, when lenders have no information about borrowers' ability and technological choices.
In an environment where trading volume affects security prices and where prices are uncertain when trades are submitted, quasi-arbitrage is the availability of a series of trades that generate infinite expected profits with an infinite Sharpe ratio. We show that when the price impact of trades is permanent and time-independent, only linear price-impact functions rule out quasi-arbitrage and thus support viable market prices. When trades have also a temporary price impact, only the permanent price impact must be linear while the temporary one can be of a more general form.
We propose that consumers' investment decisions involve processes of promotion and prevention self-regulation that are managed across separate mental accounts, with different financial products seen as representative of promotion versus prevention.
Preference structures that underlie survey or experimental responses may systematically vary during the administration of such measurement. Maturation, learning, fatigue, and response strategy shifts may all affect the sequential elicitation of respondent preferences at different points in the survey or experiment. The consequence of this phenomenon is that responses and effects can vary systematically within the dataset.
Perspective-taking, by means of creating an overlap between self and other cognitive representations, has been found to effectively decrease stereotyping and ingroup favoritism. In the present investigation, the authors examined the potential moderating role of self-esteem on the effects of perspective-taking on prejudice. In two experiments, it was found that perspective-takers, but not control participants, with temporarily or chronically high self-esteem evaluated an outgroup more positively than perspective-takers with low self-esteem.
Teacher quality is widely believed to be important for education, depsite substantial but inconsistent evidence that teachers' credentials matter for student achievement. To accurately measure variation in achievement due to teachers' characteristics—both observable and unobservable—it is essential to identify teacher fixed effects while controlling for fixed student characteristics and classroom specific variables.
Griliches' 1994 presidential address considers the limited success economists had in trying to account for the productivity slowdown of the 1970s and 1980s and "urges us toward the task of observation and measurement." In the 1990s, the high rates of productivity growth emphasized the need for new models of productivity, this time turning to estimating organization-level determinants of productivity focusing on businesses' use of new computer-based information technologies (IT), and new methods of work organization (Timothy Bresnahan et al., 2002).
The question of whether higherlifetime income households save a larger fraction of their income was the subject of much debate in the 1950s and 1960s, and while not resolved, it remains central to the evaluation of tax and macroeconomic policies. We resolve this long-standing question using new empirical methods applied to the Panel Study of Income Dynamics, the Survey of Consumer Finances, and the Consumer Expenditure Survey.
How do people react to those who have helped them? The authors propose that a recipient's evaluation of a helper's intentions and the recipient's own attitudes about future interactions with the helper depend partly on the recipient's perceptions of how the helper decided to assist: on the basis of affect, of role, or of cost-benefit calculation.
Two experiments explored the hypothesis that the impact of activating gender stereotypes on negotiated agreements in mixed-gender negotiations depends on the manner in which the stereotype is activated (explicitly vs. implicitly) and the content of the stereotype (linking negotiation performance to stereotypically male vs. stereotypically female traits). Specifically, two experiments investigated the generality and limits of stereotype reactance.
We address infinite-horizon models for oligopolies with competing retailers under demand uncertainty. We characterize the equilibrium behavior which arises under simple wholesale pricing schemes. More specifically, we consider a periodic review, infinite-horizon model for a two-echelon system with a single supplier servicing a network of competing retailers. In every period, each retailer faces a random demand volume, the distribution of which depends on his own retail price as well as those charged by possibly all competing retailers.
We study estimation of the tail-decay parameter of the marginal distribution corresponding to a discrete-time, real-valued stationary stochastic process. Assuming that the underlying process is short-range dependent, we investigate properties of estimators of the tail-decay parameter which are based on the maximal extreme value of the process observed over a sampled time interval. These estimators only assume that the tail of the marginal distribution is roughly exponential, plus some modest "mixing" conditions.
Motivation research distinguishes two types of goals: (a) ideals, which relate to people's hopes, wishes, and aspirations, and (b) oughts, which relate to people's duties, obligations, and responsibilities. We propose that, in persuasion, the accessibility of ideals increases consumers' reliance on their subjective affective responses to the ad relative to the substance of the message, whereas the accessibility of oughts increases consumers' reliance on the substance of the message relative to their subjective affective responses.
The authors hypothesize that when managers integrate two projections to form a sales estimate, they evoke and use a sales range to judge inappropriately the plausibility of each projection. This judged plausibility, as well as the "margin of error" (based on the market research company's typical accuracy), is used to assign weights to each projection. Five experiments find strong evidence for this process and demonstrate a resulting bias.
The authors propose and test a new "polyhedral" choice-based conjoint analysis question-design method that adapts each respondent's choice sets on the basis of previous answers by that respondent. Polyhedral "interior-point" algorithms design questions that quickly reduce the sets of partworths that are consistent with the respondent’s choices. To identify domains in which individual adaptation is promising (and domains in which it is not), the authors evaluate the performance of polyhedral choice-based conjoint analysis methods with Monte Carlo experiments.
It is increasingly apparent that the financial value of a firm depends on intangible assets (e.g., brands, customers, employees, knowledge) that are not on the balance sheet. In this paper, we focus on the most critical aspect of a firm—its customers. Specifically, we demonstrate how valuing customers makes it feasible to value firms, including high growth firms with negative earnings.
This paper develops a stochastic general equilibrium model for an oligopoly, in which all inventory constraint parameters are endogenously determined. We propose several systems of demand processes whose distributions are dunctions of all retailers' prices and all retailers' service levels. We proceed with the investigation of the equilibrium behavior of infinite-horizon models for industries facing this type of generalized competition, under demand uncertainty.
High-dimensional problems frequently arise in the pricing of derivative securities—for example, in pricing options on multiple underlying assets and in pricing term structure derivatives. American versions of these options, i.e., where the owner has the right to exercise early, are particularly challenging to price. We introduce a stochastic mesh method for pricing high-dimensional American options when there is a finite, but possibly large, number of exercise dates.
High-dimensional problems frequently arise in the pricing of derivative securities—for example, in pricing options on multiple underlying assets and in pricing term structure derivatives. American versions of these options, i.e., where the owner has the right to exercise early, are particularly challenging to price. We introduce a stochastic mesh method for pricing high-dimensional American options when there is a finite, but possibly large, number of exercise dates.
We study linguistic access in a mixed language context by integrating the Bilingual Interactive Activation model and the Language Differential Processing model. We show that highly proficient bilinguals, compared to less proficient bilinguals, activate phonological and semantic representations of the dominant as well as the non-dominant language, and engage in differential processing for different types of scripts (phonetic vs. logographic). For highly proficient bilinguals, language emphasis (Chinese vs.
This paper articulates and applies frameworks for examining whether consumption is excessive. We consider two criteria for the possible excessiveness (or insufficiency) of current consumption. One is an intertemporal utility-maximization criterion: actual current consumption is deemed excessive if it is higher than the level of current consumption on the consumption path that maximizes the present discounted value of utility. The other is a sustainability criterion, which requires that current consumption be consistent with non-declining living standards over time.
We propose a dynamic equilibrium model of asset prices and trading volume when agents face fixed transactions costs. We show that even small fixed costs can give rise to large "no-trade" regions for each agent's optimal trading policy. The inability to trade more frequently reduces the agents' asset demand and in equilibrium gives rise to a significant illiquidity discount in asset prices.
Most management advice today — whether it's from books or articles, prescribed in courses or by consultants — says that change is good and more change is better. Advice on how to change varies quite a bit, but it has three features in common: "Creative destruction" is its motto. "Change or perish" is its justification. And "No pain, no change" is its rationale for overcoming a purportedly innate human resistance to change. The overarching goal is to invent a spanking new future ahead of one's competitors.
One of the most controversial aspects of globalization is capital-market liberalization - not so much the liberalization of rules governing foreign direct inveestment, but those affecting short-term capital flows, speculative hot capital that can come into and out of the country. In the 1980s and 1990s, the IMF and the U.S.
Gallant, Hansen, and Tauchen (1990)Go show how to use conditioning information optimally to construct a sharper unconditional variance bound (the GHT bound) on pricing kernels. The literature predominantly resorts to a simple but suboptimal procedure that scales returns with predictive instruments and computes standard bounds using the original and scaled returns. This article provides a formal bridge between the two approaches. We propose an optimally scaled bound that coincides with the GHT bound when the first and second conditional moments are known.
Motivated by practices in customer contact centers, we consider a system that offers two modes of service: real-time and postponed with a delay guarantee. Customers are informed of anticipated delays and select their preferred option of service. The resulting system is a multiclass, multiserver queueing system with state-dependent arrival rates.
This paper considers a Markovian model of a service system motivated by communication and information services. The system has finite processing capacity and offers multiple grades of service. The highest priority users receive a "guaranteed" processing rate, while lower priority users share residual capacity according to their priority level and therefore may experience service degradation; hence the term "best effort." This paper focuses on performance analysis for this class of systems.
This paper considers a Markovian model of a service system motivated by communication and information services. The system has finite processing capacity and offers multiple grades of service. The highest priority users receive a "guaranteed" processing rate, while lower priority users share residual capacity according to their priority level and therefore may experience service degradation; hence the term "best effort." This paper focuses on performance analysis for this class of systems.
This paper has three objectives. First, we develop an equilibrium pricing model in which consumers have incomplete information about both product qualities and prices. Specifically, manufacturers can use high prices to signal high quality to uninformed consumers. Furthermore, prices of any given brand can vary geographically across retail outlets. We show that previous models are special cases of our model. Specifically, the hedonic regression model assumes that consumers have full information about all product qualities and prices.