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.
Financial statement analysis has traditionally been seen as part of the fundamental analysis required for equity valuation. But the analysis has typically been ad hoc. Drawing on recent research on accounting-based valuation, this paper outlines a financial statement analysis for use in equity valuation. Standard profitability analysis is incorporated, and extended, and is complemented with an analysis of growth. An analysis of operating activities is distinguished from the analysis of financing activities. The perspective is one of forecasting payoffs to equities.
We examine the hypothesis that dividend taxes are capitalized into share prices by focusing on investors' implicit valuations of retained earnings versus paid-in equity. Retained earnings are distributable as taxable dividends, whereas paid-in equity is distributable as a tax-free return of capital. Consistent with dividend tax capitalization, firm-level results for the United States indicate that accumulated retained earnings are valued less per unit than contributed capital. In addition, differences in dividend tax rates across U.S.
We examine the hypothesis that dividend taxes are capitalized into share prices by focusing on investors' implicit valuations of retained earnings versus paid-in equity. Retained earnings are distributable as taxable dividends, whereas paid-in equity is distributable as a tax-free return of capital. Consistent with dividend tax capitalization, firm-level results for the United States indicate that accumulated retained earnings are valued less per unit than contributed capital. In addition, differences in dividend tax rates across U.S.
To understand really new products, consumers face the challenge of constructing new knowledge structures rather simply changing existing ones. Recent research in categorization suggests that one strategy for creating representations for these new products is to use information already contained in familiar product categories. While knowledge from multiple existing categories may be relevant, little research has examined how (and if) consumers process information drawn from more than one domain.
A Sunday New York Times article on a potential development of new cancer-curing drugs caused EntreMed's stock price to rise from 12.063 at the Friday close, to open at 85 and close near 52 on Monday. It closed above 30 in the three following weeks. The enthusiasm spilled over to other biotechnology stocks. The potential breakthrough in cancer research already had been reported, however, in the journal Nature, and in various popular newspapers (including the Times) more than five months earlier.
This research examined the effects of anxiety on subsequent message processing. Experiment 1, conducted just before the handover of Hong Kong to China in 1997, manipulated anxiety by presenting Hong Kong participants with negative or positive potential consequences of the handover. Consistent with research documenting the cognitive deficits produced by anxiety, lower levels of message elaboration were obtained under high (vs. low) anxiety for an anxiety-unrelated message.
Although diffusion models have been successfully used to predict the adoption patterns of new products and technologies, little research has examined the psychological processes underlying the individual consumers adoption decision. This study uses the knowledge transfer paradigm, studied often in the context of analogies, to demonstrate that both existing knowledge and innovation continuity are major factors influencing the consumers adoption process. In two experiments, the authors demonstrate that the relationship between expertise and adoption is relatively complex.
It has been recently suggested that sponsor identification may be biased in favor of prominent brands. All things equal, consumers are more likely to attribute sponsorship to brands that they perceive to be more prominent in the marketplace, such as large-share brands. This article offers additional empirical evidence for this phenomenon and examines the underlying processes. The results of a controlled laboratory experiment replicate the phenomenon and show that this bias arises only when consumers are unable to retrieve the name of the sponsor directly from memory.
It has been recently suggested that sponsor identification may be biased in favor of prominent brands. All things equal, consumers are more likely to attribute sponsorship to brands that they perceive to be more prominent in the marketplace, such as large-share brands. This article offers additional empirical evidence for this phenomenon and examines the underlying processes. The results of a controlled laboratory experiment replicate the phenomenon and show that this bias arises only when consumers are unable to retrieve the name of the sponsor directly from memory.
Pricing financial options often requires Monte Carlo methods. One particular case is that of barrier options, whose payoff may be zero depending on whether or not an underlying asset crosses a barrier during the life of the option. This paper develops variance reduction techniques that take advantage of the special structure of barrier options, and are appropriate for general simulation problems with similar structure. We use a change of measure at each step of the simulation to reduce the variance arising from the possibility of a barrier corssing at each monitoring date.
We examine consumers' price sensitivity using a new approach that incorporates probabilistic thresholds for price gains and price losses in the reference price models. We model the threshold as a function of company, competitor and consumer specific factors. Model application to scanner panel data for coffee shows that our model is superior in fit compared to ordinary logit and two existing reference price models.
Many tendencies in social perceivers' judgments about individuals and groups can be integrated in terms of the premise that perceivers rely on implicit theories of agency acquired from cultural traditions. Whereas American culture primarily conceptualizes agency as a property of individual persons, other cultures conceptualize agency primarily in terms of collectives such as groups or nonhuman actors such as deities or fate.
Many tendencies in social perceivers' judgments about individuals and groups can be integrated in terms of the premise that perceivers rely on implicit theories of agency acquired from cultural traditions. Whereas American culture primarily conceptualizes agency as a property of individual persons, other cultures conceptualize agency primarily in terms of collectives such as groups or nonhuman actors such as deities or fate.
Recent papers have developed analytical models to explain and quantify the benefits of delayed differentiation and quick response programs. These models assume that while demands in each period are random, they are independent across time and their distribution is perfectly known, i.e., sales forecasts do not need to be updated as time progresses. In this paper, we characterize these benefits in more general settings, where parameters of the demand distributions fail to be known with accuracy or where consecutive demands are correlated.
This article develops precise connections among two general approaches to building interest rate models: a general equilibrium approach using a pricing kernel and the Heath, Jarrow, and Morton framework based on specifying forward rate volatilities and the market price of risk. The connections exploit the observation that a pricing kernel is uniquely determined by its drift. Through these connections we provide, for any arbitrage-free term structure model, a representative-consumer real production economy supporting that term structure model in equilibrium.
The seemingly quick global recovery from the Asian financial crisis and its limited effect on industrial countries produced far less sould searching about capitalism's basic principles than the Great Depression. The author argues that the global economic arrangements were inadequate in both instances and that the IMF requires serious reform to ensure a more stable global economic environment.
Shareholders of a Regional Bell Operating Company (RBOC) tend to live in the area which it serves, and an RBOC's customers tend to hold its shares rather than other RBOCs' equity. The geographic bias of the RBOC investors is closely related to the general tendency of households' portfolios to be concentrated, of employees' tendency to own their employers' stocks in their retirement accounts, and to the home country bias in the international arena.
In this paper we review the literature on first offers in negotiations. We explore the determinants of who will make the first offer, how extreme that first offer will be, what effect the first offer has on the value of the final outcome, and how first offers influence post-negotiation evaluations. The PDF attached here may not exactly replicate the final version published in the APA journal. It is not the copy of record. Copyright © 2001 by the American Psychological Association. Reproduced with permission.
This paper evaluates the practice of determining staffing requirements in service systems with random cyclic demands by using a series of stationary queueing models. We consider Markovian models with sinusoidal arrival rates and use numerical methods to show that the commonly used "stationary independent period by period" (SIPP) approach to setting staffing requirements is inaccurate for parameter values corresponding to many real situations.
This paper evaluates the practice of determining staffing requirements in service systems with random cyclic demands by using a series of stationary queueing models. We consider Markovian models with sinusoidal arrival rates and use numerical methods to show that the commonly used "stationary independent period by period" (SIPP) approach to setting staffing requirements is inaccurate for parameter values corresponding to many real situations.
We analyze a model of inventory competition among n firms that provide competing, substitutable goods. Each firm chooses initial inventory levels for their good in a single period (newsboy-like) inventory model. Customers choose dynamically based on current availability, so the inventory levels at one firm affect the demand of all competing firms. This creates a strategic interaction among the firms' inventory decisions. Our work extends earlier work on variations of this problem by Karjalainen (1992), Lippman and McCardle (1997) and Parlar (1988).
Professional services firms (e.g., consultants, accounting firms, or advertising agencies) generate and sell business solutions to their customers. In doing so, they can leverage the cumulative experience gained from serving their customer base to either reduce their variable costs or increase the quality of their products/services. In other words, their "production technology" exhibits some form of increasing returns to scale.
A study uses Procter & Gamble's value pricing strategy as an opportunity to examine consumer and competitor response to a major, sustained change in marketing-mix strategy. The study estimates an econometric model to trace how consumers and competitors react to such changes. For the average brand, the study finds that deals and coupons increase market penetration and surprisingly have little impact on customer retention as measured by share-of-category requirements and category usage.
Tests for mediation and moderation are widely employed, usually in a formulaic manner. However, these tests are only a means to the goal of developing a causal understanding of a phenomenon.
This paper integrates pricing and replenishment decisions for the following prototypical two-echelon distribution system with deterministic demands. A supplier distributes a single product to multiple retailers, who in turn sell it to consumers. The retailers serve geographically dispersed, heterogeneous markets. The demand in each retail market arrives continuously at a constant rate, which is a general decreasing function of the retail price in the market. The supplier replenishes its inventory through orders (purchases, production runs) from a source with ample capacity.
The paper "Whence Reform?" by the Polish economists Marek Dabrowski, Stanislaw Gomulka, and Jacek Rostowski (DGR) is a welcome and revealing commentary on what is called the "Stiglitz Perspective." Our main response is gratitude at DGR's agreement with the main theses of "Whither Reform?" such as the critiques of voucher privatization and of the attempts to quickly install institutional reforms involving long agency chains. Our positions are not poles apart.
The author is asked to consider the following: For a meta-analysis, how should one decide if the same independent variable was used in all studies? When one is studying the effect of a drug, it is relatively easy. However, in consumer experiments, all the experimenters may state that they manipulated the same construct, but they actually manipulated the construct in two different ways, and the type of manipulation produces differences in the results.
Economists seeking explanations for the global financial crisis of 1997-99 are reaching consensus that a major factor was weak financial institutions, which resulted in part from inadequate government regulations. At the same time many developing countries are struggling with an overregulated financial system - one that stifles innovation and the flow of credit to new entrepreneurs and that can stunt the growth of well-established firms. In particular, too many countries are relying excessively on capital adequacy standards, which are inefficient and sometimes counterproductive.
We analyze a single-period, stochastic inventory model (newsboy-like model) in which a sequence of heterogeneous customers dynamically substitute among product variants within a retail assortment when inventory is depleted. The customer choice decisions are based on a natural and classical utility maximization criterion. Faced with such substitution behavior, the retailer must choose initial inventory levels for the assortment to maximize expected profits.
Most of the market microstructure literature focuses on the liquidity of individual securities, whereas much of the asset pricing literature examines the association between systematic risk and return. We document the presence of a systematic, time-varying component of liquidity. At the moment, neither the inventory nor the asymmetric information-based approach to liquidity explains the systematic, time-varying component of liquidity.
In the field of economics, perhaps the most important break with the past - one that leaves open huge areas for future work - lies in the economics of information. It is now recognized that information is imperfect, obtaining information can be costly, there are important asymmetries of information, and the extent of information asymmetries is affected by actions of firms and individuals.
In view of the distressingly low rate of success in new product introduction, it is important to identify predictive guidelines early in the new product development process so that better choices can be made and unnecessary costs avoided. In this paper, a framework for early analysis based on the success potential embodied in the product-idea itself and the circumstances of its emergence. Based on two studies reporting actual introductions, several determinants are identified that significantly distinguish successful from unsuccessful new products in the marketplace.
For almost half a century, researchers have examined consumer knowledge of prices, often with disturbing and conflicting results. Although the general findings suggest that consumer knowledge of prices is poorer than assumed in neoclassical economic theory, significant variations among results exist. The authors synthesize findings from prior studies to determine the impact of research design choices on price recall accuracy measures.
This paper considers the current thrust in marketing to create global products, brands and strategies but also to "act local" when appropriate. Deciding which elements have similar effects and which are significantly different conceptually requires meta-analysis of each of the elements. Reviews some applications of marketing meta-analysis with a focus on international research.
Returns policies are usually thought of as being a way to insure retailers against excess inventory. The work of Pellegrini (1986), Chu (1993), Lin (1993) and Padmanabhan and Png (1997) highlights the fact that there is considerably more to returns policies than just a mechanism for insurance. Our work identifies a heretofore undocumented rationale for returns policy: its role in learning the demand for a new product. The model of manufacturer?retailer interaction assumes that the demand is uncertain but correlated across time periods.
In an empirical study using five real-world creative teams from an advertising agency, participants were given a strategic brief for a new beverage product and asked to design the layout for a print ad. Think-aloud concurrent protocols obtained from each teams copywriter, art director, and the two working together were analyzed to examine the creative process and its relationship to the created advertisement. Interpretive analyses of the protocols reveal that the teams access culturally available plot patterns but in different ways.
In an empirical study using five real-world creative teams from an advertising agency, participants were given a strategic brief for a new beverage product and asked to design the layout for a print ad. Think-aloud concurrent protocols obtained from each teams copywriter, art director, and the two working together were analyzed to examine the creative process and its relationship to the created advertisement. Interpretive analyses of the protocols reveal that the teams access culturally available plot patterns but in different ways.
Considerable research has examined how securities information, once accessed, is cognitively processed to arrive at buy, sell or hold decisions. In contrast, this paper examines whether training novice investors to simply apply the information accessing strategies used by better-performing security analysts, prior to actual cognitive processing of the information, would improve their performance. We obtain performance differences by comparing trained subjects who used the recommended strategies with untrained subjects.
This research examines, across 2 studies, the interplay between the valence and arousal components of affective states and the affective tone of a target ad. In the first study, music was used to induce a pleasant or unpleasant mood, while controlling for arousal. Participants were subsequently exposed to an ad that either had a positive-affective tone or was ambiguous in its affective tone. As predicted, the valence of the affective state colored the evaluation of the ad in a mood-congruent direction, but this coloring effect occurred only when the ad had an ambiguous-affective tone.
The effects of justice and dispositional attribution on reactions to negative supervisory feedback were examined in two studies. Study 1 showed that criticism delivered with greater interpersonal fairness resulted in more favourable dispositional attributions about the supervisor, more acceptance of the feedback, and more favourable reactions towards the superior and the organization. The beneficial influence of just interpersonal treatment was general across various feedback contexts, although the magnitude varied.
This paper describes the relationship between land use regulation and residential construction. We characterize regulations as either adding explicit costs, uncertainty, or delays to the development process. The theoretical framework suggests that the effects on new construction vary by the type of regulation. Using quarterly data from a panel of 44 U.S. metropolitan areas between 1985 and 1996, we find that land use regulation lowers the level of the steady-state of new construction.
Current psychological theory and research affirm the positive affective and motivational consequences of having personal choice. These findings have led to the popular notion that more choice is better, that the human ability to desire and manage choice is unlimited. Findings from three studies starkly challenge the implicit assumption that having more choice is necessarily more intrinsically motivating than having fewer options.
This paper describes,analyzes and evaluates an algorithm for estimating portfolio loss probabilities using Monte Carlo simulation. Obtaining accurate estimates of such loss probabilities is essential to calculating value-at-risk,which is a quantile of the loss distribution. The method employs a quadratic ("delta-gamma") approximation to the change in portfolio value to guide the selection of effective variance reduction techniques; specifically importance sampling and stratified sampling. If the approximation is exact,then the importance sampling is shown to be asymptotically optimal.
In this paper I use a principal-agnet framework to explore the relation between the hierarchical structure of firms and the accounting information technologies available to them. My analysis is related to that in Melumad, Mookherjee, and Reichelstein [1992] and Ziv [1993]. In this paper, I take an approach that allows the principal to choose the number of layers in the firm, the number of agents in each layer, and the quantity and quality of information in the firm (subject to the available information technology).
I survey and assess the development of continuous-time methods in finance during the last 30 years. The subperiod 1969 to 1980 saw a dizzying pace of development with seminal ideas in derivatives securities pricing, term structure theory, asset pricing, and optimal consumption and portfolio choices. During the period 1981 to 1999 the theory has been extended and modified to better explain empirical regularities in various subfields of finance.
This paper describes a general approach for dynamic control of stochastic networks based on fluid model analysis, where in broad terms, the stochastic network is approximated by its fluid analog, an associated fluid control problem is solved and, finally, a scheduling rule for the original system is defined by itnerpreting the fluid control policy.