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.
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.
To meet the objectives of financial reporting in the IASB's Conceptual Framework, the "balance-sheet approach" embraced by the Framework is necessary but not sufficient. Critical, but largely overlooked, is the role of uncertainty, which we argue defines the role of accrual accounting as a distinctive source of information for investors when investment outcomes are uncertain. This role is in some sense paradoxical: on the one hand, uncertainty undermines both the balance sheet (because uncertain assets are unrecognized) and the income statement (because mismatching is unavoidable).
We study multi-period sales-force incentive contracting where salespeople can engage in effort gaming, a phenomenon that has extensive empirical support. Focusing on a repeated moral hazard scenario with two independent periods and a risk-neutral agent with limited liability, we conduct a theoretical investigation to understand which effort profiles the firm can expect under the optimal contract.
Submitting queries to search engines has become a major way for consumers to search for information and products. The massive amount of search query data available today has the potential to provide valuable information on consumer preferences. In order to unlock this potential, it is necessary to understand how consumers translate their preferences into search queries. Strategic consumers should attempt to maximize the information content of the search results, conditional on a set of beliefs on how the search engine operates.
Once artificial intelligence (AI) is indistinguishable from human intelligence, and robots are highly similar in appearance and behavior to humans, there should be no reason to treat AI and robots differently from humans. However, even perfect AI and robots may still be subject to a bias (referred to as speciesism in this article), which will disadvantage them and be a barrier to their commercial adoption as chatbots, decision and recommendation systems, and staff in retail and service settings.
Many financial markets are operated as electronic limit order books (LOBs). Over short time scales, seconds to minutes, LOBs can be best understood and modeled as stochastic dynamical systems, and, specifically, ones that exhibit interesting and relevant queueing phenomena. I will offer a brief overview of algorithmic trading in a limit order book, and highlight how queueing phenomena play an important role in trade execution, and as a consequence in market behavior.
Teamwork and team incentives are increasingly prevalent in modern organizations. Performance measures used to evaluate individuals' contributions to teamwork are often non-verifiable. We study a principal-multi-agent model of relational (self-enforcing) contracts in which the optimal contract resembles a bonus pool. It specifies a minimum joint bonus floor the principal is required to pay out to the agents, and gives the principal discretion to use non-verifiable performance measures to both increase the size of the pool and to allocate the pool to the agents.
We explored the balance between societal benefits that negatively affect firms' financial performance by eroding their competitive advantage and positive effects that enhanced their reputations as technological leaders to study the effects of forward citations upon firms' financial performance.
The acceleration of start-up activity is often cited as a rationale for the R&D tax credit, a key innovation policy instrument adopted increasingly by US states over the past quarter century. While there is a strong empirical base linking the R&D tax credit to increased R&D expenditures and innovation, prior work has not provided causal evidence that this policy effects the rate of formation and growth potential of new businesses.
In this research, we investigate the prevalence, robustness and possible reasons underlying the polarity of online review distributions with the majority of the reviews at the positive end of the rating scale, a few reviews in the mid-range and some reviews at the negative end of the scale.
At each stage in customers' journeys, they encounter different types of numeric information that they process using different judgment strategies. Relevant numbers might include budgets, price, product attributes, product counts, product ratings, numbers in brand names, health and nutrition information, financial information, time-related information, and others. This manuscript provides a review of the vast array of numerical information presented to consumers at different stages of the customer journey.
Trickle-down theories suggest that status symbols and fashion trends originate from the elites and move downward, but some high-end restaurants serve lowbrow food (e.g., potato chips, macaroni and cheese), and some high-status individuals wear downscale clothing (e.g., ripped jeans, duct-taped shoes). Why would high-status actors adopt items traditionally associated with low-status groups?
Words are part of almost every marketplace interaction. Online reviews, customer service calls, press releases, marketing communications, and other interactions create a wealth of textual data. But how can marketers best use such data? This article provides an overview of automated textual analysis and details how it can be used to generate marketing insights. The authors discuss how text reflects qualities of the text producer (and the context in which the text was produced) and impacts the audience or text recipient.
Entrepreneurial motivation is important to the process of economic growth. However, evidence on the motivations of innovative entrepreneurs, and how those motivations differ across fundamental characteristics, remains scant. We conduct three interrelated field experiments with the MIT Inclusive Innovation Challenge to study how innovative entrepreneurs respond to messages of money and social impact, and how this varies across gender and culture.
Cryptocurrencies provide an important dimension of innovation to the evolution of the exchange medium we call money. There are now over 2,000 such currencies, and their potential and volume is growing. How- ever, they will, collectively and in volume, create real problems for the monetary system of a country. Central banks, which are institutions tasked with providing monetary stability, are more essential than ever.
The Emerging Video Cloud System
Few questions are fraught with more long-term implications than the way we shape our communications system. If the medium is indeed the message, and if these messages influence people and institutions, then tomorrow’s media, and today’s media policies, will govern future society, culture, and economy.
Although the gender wage gap in the U.S. has narrowed, women's career trajectories diverge from men's after the birth of children, suggesting a potential role for family-friendly policies. We provide new evidence on employer provision of these policies. Using the American Time Use Survey, we find that women are less likely than men to have access to any employer-provided paid leave and this differential is entirely explained by part-time status. Using the NLSY97, we find that young women are more likely to have access to specifically designated paid parental leave, even in part-time jobs.
In a sample of 110 countries over the period 1960–2009, we document a positive relation between the volatility and skewness of growth in the cross-section. This novel stylized fact is related to two distinct mechanisms: sudden growth spurts in emerging markets, and sharp financial crises-driven recessions in developed economies. The former phenomenon is driven by industrialization, macroeconomic stabilization, and the exploitation of natural resources. The latter is consistent with recent theories of financial frictions.
In a multi-armed bandit (MAB) problem a gambler needs to choose at each round of play one of K arms, each characterized by an unknown reward distribution. Reward realizations are only observed when an arm is selected, and the gambler's objective is to maximize cumulative expected earnings over some planning horizon of length T. To do this, the gambler needs to acquire information about arms (exploration) while simultaneously optimizing immediate rewards (exploitation). The gambler's policy is measured relative to a (static) oracle that knows the identity of the best arm a priori.
In a multi-armed bandit (MAB) problem a gambler needs to choose at each round of play one of K arms, each characterized by an unknown reward distribution. Reward realizations are only observed when an arm is selected, and the gambler's objective is to maximize cumulative expected earnings over some planning horizon of length T. To do this, the gambler needs to acquire information about arms (exploration) while simultaneously optimizing immediate rewards (exploitation). The gambler's policy is measured relative to a (static) oracle that knows the identity of the best arm a priori.
We examine economic consequences of US bank regulators' phased removal of the prudential filter for accumulated other comprehensive income for advanced approaches banks beginning on January 1, 2014. The primary effect of the AOCI filter is to exclude unrealized gains and losses on available-for-sale securities from banks' regulatory capital.
We develop a model of investment timing under uncertainty for a financially constrained firm. Facing external financing costs, the firm prefers to fund its investment through internal funds, so that the firm's optimal investment policy and value depend on both its earnings fundamentals and liquidity holdings. We show that financial constraints significantly alter the standard real options results, with the financial flexibility conferred by internal funds acting as a complement, and at times as a substitute, to the real flexibility given by the optimal timing of investment.
Over the past decade, data has transformed everyday life. While it has changed the way people shop and businesses operate (Goldfarb and Tucker, 2019), it has only just begun to permeate economists thinking about the aggregate economy. In the early twentieth century, economists like Schultz (1943) analyzed agrarian economies and land-use issues. As agricultural productivity improved, production shifted more to manufacturing. Modern macroeconomics adapted with models featuring capital and labor, markets for goods, and equilibrium wages (Solow, 1956).
We test the hypothesis that the arrival of new medical ideas played a major role in the long-run increase in US cancer survival and decline in cancer mortality, by investigating whether the types of cancer (breast, colon, lung, etc.) subject to greater penetration of new ideas, measured using the MEDLINE/PubMED database, had larger subsequent survival gains and mortality reductions, controlling for changing incidence.
Pricing greenhouse-gas (GHG) emissions involves making tradeoffs between consumption today and unknown damages in the (distant) future. While decision making under risk and uncertainty is the forte of financial economics, important insights from pricing financial assets do not typically inform standard climate–economy models. Here, we introduce EZ-Climate, a simple recursive dynamic asset pricing model that allows for a calibration of the carbon dioxide (CO2) price path based on probabilistic assumptions around climate damages.
Pricing greenhouse-gas (GHG) emissions involves making tradeoffs between consumption today and unknown damages in the (distant) future. While decision making under risk and uncertainty is the forte of financial economics, important insights from pricing financial assets do not typically inform standard climate–economy models. Here, we introduce EZ-Climate, a simple recursive dynamic asset pricing model that allows for a calibration of the carbon dioxide (CO2) price path based on probabilistic assumptions around climate damages.
We find that an increase in the "unusualness" of news with negative sentiment predicts an increase in stock market volatility. Similarly, unusual positive news forecasts lower volatility. Our analysis is based on more than 360,000 articles on 50 large financial companies, published in 1996–2014. Unusualness interacted with sentiment forecasts volatility at both the company-specific and aggregate level. These effects persist for several months. Furthermore, unusual news is reflected in volatility more slowly at the aggregate than at the company-specific level.
We find that an increase in the "unusualness" of news with negative sentiment predicts an increase in stock market volatility. Similarly, unusual positive news forecasts lower volatility. Our analysis is based on more than 360,000 articles on 50 large financial companies, published in 1996–2014. Unusualness interacted with sentiment forecasts volatility at both the company-specific and aggregate level. These effects persist for several months. Furthermore, unusual news is reflected in volatility more slowly at the aggregate than at the company-specific level.
Although consumer behavior theory has traditionally regarded evaluations as instrumental to consumer choice, in reality consumers often assess and express what they like and dislike even when there is no decision at stake. Why are consumers so eager to express their evaluations when there is no ostensible purpose for doing so? In this research, we advance the thesis that this is because consumers derive an inherent pleasure from assessing and expressing their likes and dislikes.
Background: We analyzed the role that the launch of new drugs has played in reducing the number of years of life lost (YLL) before three different ages (85, 70 and 55 y) due to 66 diseases in 27 countries.
Methods: We estimated two-way fixed-effects models of the rate of decline of the disease- and countryspecific age-standardized YLL rate. The models control for the average decline in the YLL rate in each country and from each disease.
Motivated by the proliferation of user-generated product-review information and its widespread use, this note studies a market where consumers are heterogeneous in terms of their willingness-to-pay for a new product. Each consumer observes the binary reviews (like or dislike) of consumers who purchased the product in the past and uses Bayesian updating to infer the product quality.
We develop a classification methodology for the context and content of news articles to predict risk and return in stock markets in 51 developed and emerging economies. A parsimonious summary of news, including topic-specific sentiment, frequency, and unusualness (entropy) of word flow, predicts future country-level returns, volatilities, and drawdowns. Economic and statistical significance are high and larger for year-ahead than monthly predictions. The effect of news measures on market outcomes differs by country type and over time.
We develop a classification methodology for the context and content of news articles to predict risk and return in stock markets in 51 developed and emerging economies. A parsimonious summary of news, including topic-specific sentiment, frequency, and unusualness (entropy) of word flow, predicts future country-level returns, volatilities, and drawdowns. Economic and statistical significance are high and larger for year-ahead than monthly predictions. The effect of news measures on market outcomes differs by country type and over time.
Human enhancement products allow consumers to radically enhance their mental abilities. Focusing on cognitive enhancements, we introduce and study a novel factor dehumanization (i.e., denying a person emotional ability and likening them to a robot) which plays a key role in consumers' reluctance to use enhancement products. In study 1, consumers who enhance their mental abilities beyond normal levels were dehumanized, whereas consumers who use the same products to restore lost abilities were not.
Human enhancement products allow consumers to radically enhance their mental abilities. Focusing on cognitive enhancements, we introduce and study a novel factor dehumanization (i.e., denying a person emotional ability and likening them to a robot) which plays a key role in consumers' reluctance to use enhancement products. In study 1, consumers who enhance their mental abilities beyond normal levels were dehumanized, whereas consumers who use the same products to restore lost abilities were not.
The main objectives of this commentary are to discuss the replication study of Adam and Galinsky (2012, Experiment 1) by Burns, Fox, Greenstein, Olbright, and Montgomery, clarify the main idea behind enclothed cognition, supplement the literature review presented by Burns et al., discuss why our original study failed to replicate, and offer potential avenues for future research. Overall, we believe the replication study was conducted competently, and thus the results cast doubt on our finding that wearing a lab coat decreases errors on the Stroop test. At the same time, Burns et al.
Prior research attributes the positive effects of passion on professional success to intrapersonal characteristics. We propose that interpersonal processes are also critical because observers confer status on and support those who express passion. These interpersonal benefits of expressing passion are, however, contingent on several factors related to the expresser, perceiver, and context. Six studies, including entrepreneurial pitches from Dragons' Den and two pre-registered experiments, establish three key findings.
Clinical studies have shown that the use of certain drugs can reduce disability. Access to prescription drugs varies across countries. Even when the total number of drugs launched in two countries is similar, the specific drugs that were launched, and the diseases those drugs are used to treat, may differ.
This paper investigates how book rate of return under GAAP relates to risk and the required return for investing. A standard view sees the book rate of return as a measure of profitability to be compared to the required return to evaluate the success of an investment. A contrasting view sees the book rate of return as indicative of the required return, consistent with the standard risk-return tradeoff. There clearly is some sorting out to do.
We propose the standard neoclassical model of investment under uncertainty with short-run adjustment frictions as a benchmark for earnings-return patterns absent accounting influences. We show that our proposed benchmark generates a wide range of earnings-return patterns documented in prior accounting research. Notably, our model generates a concave earnings-return relation, similar to that of Basu [1997], and predicts that the earnings-return concavity increases in the volatility of firms' underlying shock processes and decreases in investment levels.