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.
We investigate how nonfinancial performance measures (NPMs) can be used to encourage cooperation across divisions. The implementation of a project often requires joint efforts by multiple divisions. However, privately informed division managers sometimes find it in their self-interest to forgo profitable joint projects or to underinvest in relationship-specific assets.
In this article, we define good scholarship, highlight our points of disagreement with Locke and Latham (2009), and call for further academic research to examine the full range of goal setting's effects. We reiterate our original claim that goal setting, like a potent medication, can produce both beneficial effects and systematic, negative outcomes, and as a result, it should be carefully prescribed and closely monitored.
This paper provides an optimal filtering methodology in discretely observed continuous-time jump-diffusion models. Although the filtering problem has received little attention, it is useful for estimating latent states, forecasting volatility and returns, computing model diagnostics such as likelihood ratios, and parameter estimation. Our approach combines time-discretization schemes with Monte Carlo methods. It is quite general, applying in nonlinear and multivariate jump-diffusion models and models with nonanalytic observation equations.
Generalizing earlier work on staffing and routing in telephone call centers, we consider a processing network model with large server pools and doubly stochastic input flows. In this model the processing of a job may involve several distinct operations. Alternative processing modes are also allowed. Given a finite planning horizon, attention is focused on the two-level problem of capacity choice and dynamic system control. A pointwise stationary fluid model (PSFM) is used to approximate system dynamics, which allows development of practical policies with a manageable computational burden.
We investigate determinants of slave family discounts in the New Orleans slave market. We find large price discounts for families unrelated to scale effects, childcare costs, legal restrictions, or transport costs. We posit that because family members voluntarily cared for each other, sellers sometimes found it advantageous to keep families together (when families included needy or dependent members). Evidence from ship manifests carrying slaves for sale in New Orleans provides direct evidence for selectivity bias in explaining slave family discounts.
Past work on interpersonal assertiveness and organizational effectiveness paints a mixed picture: some research suggests a positive link, other work highlights negative effects. This article reviews recent research and an account that stems from a different perspective, looking at assertiveness as a factor in leadership shortcomings and failure. This approach suggests that interpersonal assertiveness is a major factor and has a curvilinear, inverted-U-shaped relationship with leadership effectiveness. I review evidence for this effect as well as social and instrumental outcome mediators.
A criticism of mechanism design theory is that the optimal mechanism designed for one environment can produce drastically different actions, outcomes, and payoffs in a second, even slightly different, environment. In this sense, the theoretically optimal mechanisms usually studied are not "robust." To study robust mechanisms while maintaining an expected utility maximization approach, we study a multiagent model in which the mechanism must be designed before the environment is as well understood as is usually assumed.
We revisit and critically reevaluate the widely accepted modernization hypothesis which claims that per capita income causes the creation and the consolidation of democracy. Existing studies find support for this hypothesis because they fail to control for the presence of omitted variables. Controlling for these factors either by including country fixed effects in a linear model or by including parameterized random effects in a non-linear double hazard model removes the correlation between income and the likelihood of transitions to and from democratic regimes.
We investigate pricing effects of the joint production of loans and security underwritings. We control for firm and borrower characteristics, including differences in sequencing, which are important for pricing. Contrary to previous studies, when banks combine lending and underwriting within the same customer relationship they charge premiums for both loans and underwriting services. Abstracting from effects of joint production within relationships, depository banks engaged in underwriting price lending and underwriting more cheaply than stand alone investment banks.
Past research has established a connection between regret (negative emotions connected to cognitions about how past actions might have achieved better outcomes) and both depression and anxiety. In the present research, the relations between regret, repetitive thought, depression, and anxiety were examined in a nationally representative telephone survey. Although both regret and repetitive thought were associated with general distress, only regret was associated with anhedonic depression and anxious arousal.
The Financial Accounting Standards Committee of the American Accounting Association (the Committee) is charged with responding to requests for comments from standard-setters on issues related to financial reporting. The Financial Accounting Foundation (FAF) released for public comment on December 18, 2007 with a response period ending on February 10, 2008, "Proposed Changes to Oversight, Structure, and Operations of the FAF, FASB, and GASB (the proposal). This commentary concerns four important public policy issues in the proposal with the most relevance for accounting standard setting:
We offer a constructive critique of Regulatory Engagement Theory (Higgins, E. T. (2006). Value from hedonic experience and engagement. Psychological Review, 113(3), 439?460.; Higgins, E. T., and Scholer, A. A. (2009). Engaging the consumer: The science and art of the value creation process. Journal of Consumer Psychology, 19(2).). After highlighting the major tenets of the theory and its main contributions, we identify some of its conceptual ambiguities.
Affine jump-diffusion (AJD) processes constitute a large and widely used class of continuous-time asset pricing models that balance tractability and flexibility in matching market data. The prices of e.g., bonds, options, and other assets in AJD models are given by extended pricing transforms that have an exponential-affine form; these transforms have been characterized in great generality by Duffie et al. [2000. Transform analysis and asset pricing for affine jump-diffusions. Econometrica 68, 1343–1376].
Anchoring refers to a biased judgment on a stimulus based on the initial assessment of another stimulus and the insufficient adjustment away from that initial assessment. Previous research indicates that anchoring seems to be a general phenomenon, underlying a wide variety of processing strategies (Epley and Gilovich 2001; Johnson and Puto 1987; Tversky and Kahnemann 1974). Every time when individuals form an impression or an image about a stimulus while another stimulus is present, these impressions may be subject to anchoring effects.
This paper argues that the U.S. mortgage debacle must be analyzed in the broader setting of global real estate markets. Recent U.S. home price growth closely tracked increases in other developed economies. The analysis distinguishes among market regions in terms of supply elasticity and localized transactions-costs. A series of user-cost models are presented which imply that interest rate fluctuations must figure prominently in any explanation of movements in price/rent ratios. National factors such as the expansion of subprime credit must also be accounted for.
This paper argues that the U.S. mortgage debacle must be analyzed in the broader setting of global real estate markets. Recent U.S. home price growth closely tracked increases in other developed economies. The analysis distinguishes among market regions in terms of supply elasticity and localized transactions-costs. A series of user-cost models are presented which imply that interest rate fluctuations must figure prominently in any explanation of movements in price/rent ratios. National factors such as the expansion of subprime credit must also be accounted for.
The first hints of trouble in the mortgage market surfaced in mid-2005, and conditions subsequently began to deteriorate rapidly. Mortgage defaults and delinquencies are particularly concentrated among borrowers whose mortgages are classified as "subprime" or "near-prime." The main factors underlying the rise in mortgage defaults appear to be declines in house prices and deteriorated underwriting standards, in particular an increase in loan-to-value ratios and in the share of mortgages with little or no documentation of income.
We document how starting prices differentially impact outcomes in negotiations and auctions. In negotiations (where the number of actors is often predetermined), starting prices drive cognitive processes, leading individuals to selectively focus on information consistent with, and make valuations similar to, the starting value. Thus, starting high will often lead to ending high in negotiations.
In our recent article (Leung, Maddux, Galinsky, & Chiu, April 2008), we presented evidence supporting the idea that multicultural experience can facilitate creativity. In a reply to that article, Rich (2009, this issue) has argued that our review, although timely and important, was somewhat limited in scope, focusing mostly on smaller forms of creativity ("little c": e.g., paper- and-pencil measures of creativity) as well as on larger forms of multicultural experience ("Big M": e.g., living in a foreign country).
In this article, we dissect changes in the composition of Indian imports following its 1991 trade liberalization to illustrate the potential scope for previously unavailable inputs to bolster the performance of domestic firms. The analysis reveals that trade reform spurred imports of previously unavailable products and varieties in many products that arguably can be characterized as important inputs for manufacturing firms. New imported inputs in large extent originated from more advanced countries and new imported varieties exhibited higher unit values relative to existing imports.
Previous research concludes that options are mispriced based on the high average returns, CAPM alphas, and Sharpe ratios of various put selling strategies. One criticism of these conclusions is that these benchmarks are ill suited to handle the extreme statistical nature of option returns generated by nonlinear payoffs. We propose an alternative way to evaluate the statistical significance of option returns by comparing historical statistics to those generated by option pricing models.
Previous research concludes that options are mispriced based on the high average returns, CAPM alphas, and Sharpe ratios of various put selling strategies. One criticism of these conclusions is that these benchmarks are ill suited to handle the extreme statistical nature of option returns generated by nonlinear payoffs. We propose an alternative way to evaluate the statistical significance of option returns by comparing historical statistics to those generated by option pricing models.
Individuals often honor sunk costs by increasing their commitment to failing courses of action. Since this escalation of commitment is fueled by self-justification processes, a widely offered prescription for preventing escalation is to have separate individuals make the initial and subsequent resource allocation decisions. In contrast to this proposed remedy, four experiments explored whether a psychological connection between two decision-makers leads the second decision-maker to invest further in the failing program orchestrated by the initial decision-maker.
We present a novel role of affect in the expression of culture. Four experiments tested whether individuals' affective states moderate the expression of culturally normative cognitions and behaviors. We consistently found that value expressions, self-construals, and behaviors were less consistent with cultural norms when individuals were experiencing positive rather than negative affect. Positive affect allowed individuals to explore novel thoughts and behaviors that departed from cultural constraints, whereas negative affect bound people to cultural norms.
While residents receive similar benefits from many local government programs, only about one-third of all households have children in public schools. We argue that capitalization of school spending into house prices can encourage even childless residents to support spending on schools. We identify a proxy for the extent of capitalization — the supply of land available for new development — and show that towns in Massachusetts with little undeveloped land have larger changes in house prices in response to a plausibly exogenous spending shock.
We consider the one-armed bandit problem of Woodroofe [J. Amer. Statist. Assoc. 74 (1979) 799–806], which involves sequential sampling from two populations: one whose characteristics are known, and one which depends on an unknown parameter and incorporates a covariate. The goal is to maximize cumulative expected reward. We study this problem in a minimax setting, and develop rate-optimal polices that involve suitable modifications of the myopic rule.
Nearly every decision a person makes is restricted in some way. While we are painfully aware of some of these restrictions, others go largely undetected. This paper presents a conceptual framework for understanding how restrictions interact with situational and individual characteristics, as well as goals to influence behavior. Implications for overlooked research opportunities in choice modeling are presented and discussed.
This paper introduces new variance reduction techniques and computational improvements to Monte Carlo methods for pricing American-style options. For simulation algorithms that compute lower bounds of American option values, we apply martingale control variates and introduce the local policy enhancement, which adopts a local simulation to improve the exercise policy. For duality-based upper bound methods, specifically the primal-dual simulation algorithm, we have developed two improvements.
As the diversity in end-user devices and networks grows, it becomes important to be able to efficiently and adaptively serve media content to different types of users. A key question surrounding adaptive media is how to do Rate-Distortion optimized scheduling. Typically, distortion is measured with a single distortion measure, such as the Mean-Squared Error compared to the original high resolution image or video sequence.
We investigate the effect of discrete sampling and asset price jumps on fair variance and volatility swap strikes. Fair discrete volatility strikes and fair discrete variance strikes are derived in different models of the underlying evolution of the asset price: the Black-Scholes model, the Heston stochastic volatility model, the Merton jump-diffusion model and the Bates and Scott stochastic volatility and jump model.
Four studies investigated whether activating a social identity can lead group members to choose options that are labeled in words associated with that identity. When political identities were made salient, Republicans (but not Democrats) became more likely to choose the gamble or investment option labeled "conservative." This shift did not occur in a condition in which the same options were unlabeled.
Previous research suggests that narrow identification with one's own racial group impedes coalition building among minorities. Consistent with this research, the 2008 Democratic primary was marked by racial differences in voting preferences: Black voters overwhelmingly preferred Barack Obama, a Black candidate, and Latinos and Asians largely favored Hillary Clinton, a White candidate. We investigated one approach to overcoming this divide: highlighting one's negational identity.
The authors propose that culture affects people through their perceptions of what is consensually believed. Whereas past research has examined whether cultural differences in social judgment are mediated by differences in individuals’ personal values and beliefs, this article investigates whether they are mediated by differences in individuals’ perceptions of the views of people around them.
This research examines how the reliance on emotional feelings as a heuristic influences the proposal of offers in negotiations. Results from three experiments based on the classic ultimatum game show that, compared to proposers who do not rely on their feelings, proposers who rely on their feelings make less generous offers in the standard ultimatum game, more generous offers in a variant of the game allowing responders to make counteroffers, and less generous offers in the dictator game where no responses are allowed.
Portfolio credit derivatives are contracts that are tied to an underlying portfolio of defaultable reference assets and have payoffs that depend on the default times of these assets. The hedging of credit derivatives involves the calculation of the sensitivity of the contract value with respect to changes in the credit spreads of the underlying assets, or, more generally, with respect to parameters of the default-time distributions. We derive and analyze Monte Carlo estimators of these sensitivities.
Much of the puzzle of underissuance of national bank notes can be resolved for the period 1880–1900 (the period when detailed, bank-level data are available) by disaggregating, taking account of regulatory limits, and considering differences in banks' opportunity costs cross-sectionally and over time. Banks with poor lending opportunities issued more, within regulatory limits. Banks tended to issue more when bond yields (the backing for notes) were high relative to lending opportunities.
Drawing on the motivated cognition literature, we examine how self-affirmation processes influence self-justification needs and escalation decisions. Study 1 found that individuals with a larger pool of affirmational resources (high self-esteem) reduced their escalation compared to those with fewer affirmational resources (low self-esteem). Study 2 extended these findings by demonstrating that individuals also de-escalated their commitments when they were provided an opportunity to affirm on an important value.
Three experiments examine how power affects consumers' spending propensities. By integrating literatures suggesting that (a) powerlessness is aversive, (b) status is one basis of power, and (c) products can signal status, the authors argue that low power fosters a desire to acquire products associated with status to compensate for lacking power. Supporting this compensatory hypothesis, results show that low power increased consumers' willingness to pay for auction items and consumers' reservation prices in negotiations but only when products were status related.
This article discusses research into the effect of gender role expectations in distributional negotiations. The differences between the gender effects in personally oriented negotiations and those undertaken on behalf of another party are considered. This hypothesis is indicated by research suggesting that community oriented behaviors are feminine while acting on personal agency is considered masculine. The role of anticipated responses, particularly the anticipation of backlash, in determining the gendered aspects of distributional negotiation is explored.
Traditional explanations for indirect trade through an entrepot focus on savings in transport costs and the role of specialized agents in processing and distribution. We provide an alternative perspective based on the potential for entrepots to facilitate tariff evasion. Using data on direct exports to mainland China and indirect exports via Hong Kong SAR, we find that the indirect export rate rises with the Chinese tariff rate, despite the absence of any legal tax advantage to sending goods via Hong Kong SAR.
What is the effect of option categorization on choosers' satisfaction? A combination of field and laboratory experiments reveals that the mere presence of categories, irrespective of their content, positively influences the satisfaction of choosers who are unfamiliar with the choice domain. This "mere categorization effect" is driven by a greater number of categories signaling greater variety amongst the available options, which allows for a sense of self-determination from choice.
This paper offers a new approach to estimate countries' de facto exchange rate regimes, a synthesis of two techniques. One is a technique that the authors have used in the past to estimate implicit de facto weights when the hypothesis is a basket peg with little flexibility. The second is a technique used by others to estimate the de facto degree of exchange rate flexibility when the hypothesis is an anchor to the dollar or some other single major currency, but with a possibly substantial degree of flexibility around that anchor.
We investigate the effects of babyfaceness on the trustworthiness and judgments of a company's chief executive officer in a public relations crisis. Experiment 1 demonstrates boundary conditions for the babyfaceness-honesty trait inference and its influence on company evaluations. Experiment 2 shows that trait inferences of honesty are drawn spontaneously but are corrected in the presence of situational evidence (a severe crisis) if cognitive resources are available.
This paper considers a profit-maximizing make-to-order manufacturer that offers multiple products to a market of price and delay sensitive users, using a model that captures three aspects of particular interest: first, the joint use of dynamic pricing and lead-time quotation controls to manage demand; second, the presence of a dual sourcing mode that can expedite orders at a cost; and third, the interaction of the aforementioned demand controls with the operational decisions of sequencing and expediting that the firm must employ to optimize revenues and satisfy the quoted lead times.
We revisit one of the central empirical findings of the political economy literature that higher income per capita causes democracy. Existing studies establish a strong cross-country correlation between income and democracy but do not typically control for factors that simultaneously affect both variables. In the post-war sample, we show that controlling for such factors by including country fixed effects removes the statistical association between income per capita and various measures of democracy.