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.
Examines the effectiveness of incentives to promote household saving in the United States. Individual retirement accounts; 401(k) plans; Cost-benefit approach to saving incentives; Welfare-theoretic approach to saving incentives.
We derive efficient and highly accurate approximations for the customer waiting-time distributions experienced in stochastic economic lot scheduling systems (SELSPs) that are governed by general base-stock policies under a cyclic or more general periodic item sequence. SELSPs involve settings where several items need to be produced in a common facility with limited capacity, under significant uncertainty regarding demands, unit production times, setup times, or combinations thereof.
This articles studies the design and valuation of debt contracts in a general dynamic setting under uncertainty. We incorporate some insights of the recent corporate finance literature into a valuation framework. The basic framework is an extensive form game determined by the terms of a debt contract and applicable bankruptcy laws. Debtholders and equityholders behave noncooperatively. The firm's reorganization boundary is determined endogenously. Strategic debt service results in significantly higher default premia at even small liquidation costs.
Many sequential planning problems can be represented as a shortest path problem in an acyclic network. This includes all deterministic dynamic programs as well as certain stochastic sequential decision problems. In this article, we identify a large class of shortest path problems for which a general efficient algorithm for the simultaneous solution and detection of minimal forecast horizons is developed.
Simulation has proved to be a valuable tool for estimating security prices for which simple closed form solutions do not exist. In this paper we present two direct methods, a pathwise method and a likelihood ratio method, for estimating derivatives of security prices using simulation. With the direct methods, the information from a single simulation can be used to estimate multiple derivatives along with a security's price. The main advantage of the direct methods over re-simulation is increased computational speed.
Simulation has proved to be a valuable tool for estimating security prices for which simple closed form solutions do not exist. In this paper we present two direct methods, a pathwise method and a likelihood ratio method, for estimating derivatives of security prices using simulation. With the direct methods, the information from a single simulation can be used to estimate multiple derivatives along with a security's price. The main advantage of the direct methods over re-simulation is increased computational speed.
Classical economic theory mainly examines decision making from a normative perspective. Social and cognitive psychology's view of decision making is more descriptive. This article presents a structured synthesis of a third stream of research, which intersects economics and psyhology, and is known as Behavioral Decision Theory. This stream of research shows that decision makers often deviate from prescritive norms. This article explains why such deviations occur and what they imply for marketing.
We study the effect of changing buffer sizes in serial lines withgeneral blocking, a mechanism that incorporates limited intermediate finished goods inventory at each stage, as well as limited intermediate raw material inventory. This model includes ordinarymanufacturing, communication, andkanban blocking as special cases. We present conditions under which increasing buffer sizes or re-allocating buffer capacity increases throughput, and in some cases characterize optimal allocations.
A study was conducted to interpret the price-earnings ratio (P/E) and the market-to-book ratio (P/B) and describe their articulation. It also aimed to explain the role of book rate-of-return on equity in determining the ratios and the relation between them. The P/E ratio signifies future growth in earnings positively related to expected future return on equity and negatively related to current return on equity. On the other hand, the P/B ratio indicates only expected future return on equity.
This paper offers an exact definition of the value created by firms together with their suppliers and buyers. The "added value" of a firm is similarly defined, and shown under certain conditions to impose an upper bound on how much value the firm can capture. The key to a firm's achieving a positive added value is the existence of asymmetries between the firm and other firms. The paper identifies four routes ("value-based" strategies) that lead to tthe creation of such asymmetries. Our analysis reveals the equal importance of a firm's supplier and buyer relations.
We examine conditions under which "Veblen effects" arise from the desire to achieve social status by signaling wealth through conspicuous consumption. While Veblen effects cannot ordinarily arise when preferences satisfy a "single-crossing property," they may emerge when this property fails. In that case, "budget" brands are priced at marginal cost, while "luxury" brands, though not intrinsically superior, are sold at higher prices to consumers seeking to advertise wealth.
Industries differ widely in how much managerial discretion, or latitude of action, they allow. This research contributes to the reliable and valid measurement of this important but hard-to-measure construct. We found that (1) a panel of academics showed very high consistency in rating managerial discretion in diverse industries, (2) a panel of security analysts agreed strongly with the academics, and (3) the panel ratings were highly related to archival indicators of discretion posited by Hambrick and Finkelstein.
We give a unified presentation of stability results for stochastic vector difference equations Yn+1 = An ⊗ Yn ⊕ Bn based on various choices of binary operations ⊕ and ⊗, assuming that {(An, Bn), n ≥ 0} are stationary and ergodic. In the scalar case, under standard addition and multiplication, the key condition for stability is E[log |A0|]<0. In the generalizations, the condition takes the form γ <0, where γ is the limit of a subadditive process associated with {A(n), n≥0}.
Theoretical work on financing costs under asymmetric information has linked shifts in firms' internal funds and investment spending, holding constant investment opportunities. An impediment to convincing tests of these models is the lack of firm-level data on the relative cost of internal and external funds. We use a tax experiment, the surtax on undistributed profits in the 1930s, to identify firms' relative cost of internal and external funds by calculating surtax margins.
Theoretical work on financing costs under asymmetric information has linked shifts in firms' internal funds and investment spending, holding constant investment opportunities. An impediment to convincing tests of these models is the lack of firm-level data on the relative cost of internal and external funds. We use a tax experiment, the surtax on undistributed profits in the 1930s, to identify firms' relative cost of internal and external funds by calculating surtax margins.
This article analyzes the time variation in conditional means and variances of monthly and quarterly excess dollar returns on Eurocurrency investiments. All results are based on a vector autoregression with weekly sampled data on exchange-rate changes and forward premiums of three currencies. Both past exchange-rate changes and forward premiums predict future forward-market returns. Moreover, past forward-premium volatilities predict the volatility of exchange rates. Expected forward-market returns are very variable and persistent and exhibit marked comovements.
This paper examines CEO pay in the banking industry and the effect of deregulating the market for corporate control. Using panel data on 147 banks over the 1980s, we find higher levels of pay in competitive corporate control markets, i.e., those in which interstate banking is permitted. We also find a stronger pay-performance relation in deregulated interstate banking markets. Finally, CEO turnover increases substantially after deregulation.
This study proposes a typology of reasons why people substantially delay important consumer decisions The delay reasons we study are drawn from delay typologies identified in other contexts as well as from the product diffusion literature. Two studies reported here examine why subjects delay consumer decisions. These support most of the reasons in the proposed typology, while some unanticipated delay reasons also emerge.
This paper attempts to find characteristics of product categories, brands, and ad copy that lead to either increased or decreased effectiveness of advertising spending on ad awareness, brand awareness, or purchase intentions, as measured through tracking data.
The article presents a study using the Euler equation for capital accumulation by individual business firms. First, authors' use an estimation strategy based on the Euler equation representation of firms' investment decisions. This strategy reflects reservations with standard investment models based on the q theory with adjustment costs. In particular, there are well-known problems in measuring marginal q, as well as concerns that observed stock market valuations may not accord with the predictions of the efficient markets hypothesis.
We empirically explore the accuracy of the simple stationary peak hour approximation (SPHA) for estimating peak hour performance in multiserver queuing systems with exponential service times and periodic (sinusoidal) Poisson arrival processes. We show that the SPHA is very good for a range of parameter values corresponding to a reasonably broad spectrum of real systems. However, we do find and document that there are many situation in which this approximation will be very inaccurate.
We empirically explore the accuracy of the simple stationary peak hour approximation (SPHA) for estimating peak hour performance in multiserver queuing systems with exponential service times and periodic (sinusoidal) Poisson arrival processes. We show that the SPHA is very good for a range of parameter values corresponding to a reasonably broad spectrum of real systems. However, we do find and document that there are many situation in which this approximation will be very inaccurate.
The authors describe a model of the effects of advertised and observed quality on consumer expectations about new product quality. They test the model using data from two computer-controlled shopping experiments. In both studies, quadratic and gamma specifications for the effect of advertising claim discrepancy on expectation change fit better than a linear model. Furthermore, the adaptive expectations framework describes the updating of consumer expectations when the consumer observes the quality of the new product.
In most dynamic planning problems, one observes that an optimal decision at any given stage depends on limited information, i.e. information pertaining to a limited set of adjacent or nearby stages. This holds in particular for planning problems over time, where an optimal decision in a given period depends on information related to a limited future time horizon, a so-called forecast horizon, only. In this paper we identify a general class of dynamic programs in which an efficient forward algorithm can be designed to solve the problem and to identify minimal forecast horizons.
We consider limits of first passage times to indexed families of nested sets in regenerative processes. The sets are exponentially rare, in the sense that the probability that the process reaches an indexed set in a cycle vanishes exponentially fast in the indexing parameter. Under appropriate formulations of this hypothesis, we prove strong laws, iterated logarithm laws and limits in distribution, both for the index of the rarest set reached in a cycle and for the time to reach a set.
Bundling of products is very prevalent in the marketplace. For example, travel packages include airfare, lodging, and a rental car. Considerable economic research has focused on the change in profits and consumer surplus that ensues if bundles are offered. There is relatively little research in marketing that deals with bundling, however. In this article we concentrate on some tactical issues of bundling, such as which types of products should be bundled, what price one can charge for the bundle, and how the price of the bundle should be presented to consumers to improve purchase intent.
This paper seeks to establish a parametric linkage between fuzzy set theoretic techniques and commonly used preference formation rules in psychology and marketing. Such a linkage helps to benefit both fields. We accomplish this objective by using a linear model with interaction term which nests many common preference protocols; conjunction (fuzzy and), disjunction (fuzzy or), counterbalance (fuzzy xor) and linear compensatory.
We consider the control of a production facility subject to multiple failure modes. Motivated by a work of Akella-Kumar (1986) and Bielecki-Kumar (1988) on single-failure-mode models, we study hedging-point policies, in which production is controlled to its maximum rate whenever inventory is below a critical level and set to zero whenever inventory is above that level. The maximum production rate varies with the state of the machine.
Micro data studies of household saving often find a significant group in the population with virtually no wealth, raising concerns about heterogeneity in motives for saving. In particular, this heterogeneity has been interpreted as evidence against the life cycle model of saving. This paper argues that a life cycle model can replicate observed patterns in household wealth accumulation after accounting explicitly for precautionary saving and asset-based, means-tested social insurance.
Micro data studies of household saving often find a significant group in the population with virtually no wealth, raising concerns about heterogeneity in motives for saving. In particular, this heterogeneity has been interpreted as evidence against the life cycle model of saving. This paper argues that a life cycle model can replicate observed patterns in household wealth accumulation after accounting explicitly for precautionary saving and asset-based, means-tested social insurance.
We model the effects of variety-seeking and marketing-mix variables on consumers' purchases of coffee using a nested logit model. We premise that on any given purchase occasion, the utilities of brands other than the one purchased on the previous occasion may be correlated due to the consumer's tendency to seek variety or to avoid variety. This results in a two-level hierarchical model where choice on any purchase occasion is conditioned on the brand purchased on the immediately preceding occasion.
This article addresses the problem of valuing American call options with caps on dividend-paying assets. Since early exercise is allowed, the valuation problem requires the determination of optimal exercise policies. Options with two types of caps are analyzed: constant caps and caps with a constant growth rate. For constant caps, it is optimal to exercise at the first time at which the underlying asset's price equals or exceeds the minimum of the cap and the optimal exercise boundary for the corresponding uncapped option.
We analyze the performance of an importance sampling estimator for a rare-event probability in tandem Jackson networks. The rare event we consider corresponds to the network population reaching K before returning to ø, starting from ø, with K large. The estimator we study is based on interchanging the arrival rate and the smallest service rate and is therefore a generalization of the asymptotically optimal estimator for an M/M/1 queue.
Examines how the benefits to managers of corporate control affect the relationship between managerial ownership and the stock returns of acquiring firms. Examination of mergers between 1985 and 1991; Characteristics of agency costs to equity in various levels of managerial ownership.
We consider a production/distribution system represented by a general directed acyclic network. Each node is associated with a specific "product" at a given location and/or production stage. An arc (i, j) indicates that item i is used to "produce" item j. External demands may occur at any of the network's nodes. These demands occur continuously at item-specific constant rates. Components may be assembled in any given proportions. The cost structure consists of inventory carrying, viable, and fixed production/distribution costs.
Beneath the pounding of the percussion and sonority of the strings, beyond the reach of the conductor's gesticulations and exhortations, behind the serenity of the crowd's spirit looms the daunting, incessant, and necessary process of funding a symphony orchestra, of creating and maintaining a public for its music.
A decade of work in marketing meta-analysis has produced empirical generalizations concerning parameters in models of advertising, price, diffusion, and consumer behavior. Results from these meta-analyses should replace the now discredited zero null hypotheses of such parameters in future work. Probably more important than nonzero "grand mean" average effects is an approach called Parametric Adjustability, which provides estimated parameter values for specific conditions reflecting markets and research technologies.
This article develops a return-based measure of market integration for nineteen emerging equity markets. It then examines the relation between that measure, other return characteristics, and broadly defined investment barriers. Although the analysis is exploratory, some clear conclusions emerge. First, global factors account for a small fraction of the time variation in expected returns in most markets, and global predictability has declined over time. Second, the emerging markets exhibit differing degrees of market integration with the U.S.
We consider the problem of simultaneously allocating servers and demands in a service system with independent multiple facilities. We assume a fixed number of facilities and total servers which must service a given Poisson arrival stream. We also assume that service times are identically distributed and independent of the server or facility. The allocation decision is one of simultaneously determining the number of servers and the fraction of the total arrival stream for each facility in order to optimize a givne performance measure.
We investigate the stability of discrete-event systems modeled as generalized semi-Markov processes with event epochs that satisfy (max, +) recursions. We obtain three types of results, under conditions: We show that there exists for each event a cycle time, which is the long-run average time between event occurrences; we characterize the rate of convergence to this limit, bounding the error for finite horizons; and we give conditions for delays (i.e., differences between event epochs) to converge to a stationary regime.
A unique dataset collected from the personnel records of a large company is used to study the relationship between on-the-job training and worker productivity. The analysis shows how information contained in a company database is useful for eliminating heterogeneity bias in the estimation of training's impact on wages and job performance.
The question of whether lay attributors are biased in their discounting of 1 cause given an alternative cause has not been resolved by decades of research, largely due to the lack of a clear standard for the rational amount of discounting. The authors propose a normative model in which the attributor's causal schemas and discounting inferences are represented in terms of subjective probability.
This paper addresses a class of single-machine scheduling problems with a common due-date for all jobs, and general earliness and tardiness costs. We show that a class of simple, polynomial, "greedy-type" heuristics can be used to generate close-to-optimal schedules. An extensive numerical study exhibits small optimality gaps. For convex cost structures, we establish that the worst-case optimality gap is bounded by e−i ≈ 0.36, if the due-date is non-restrictive.
This paper analyzes how organizations can minimize costs of processing and communicating information. Communication is costly because it takes time for an agent to absorb new information sent by others. Agents can reduce this time by specializingin the processing ofparticular types ofinformation. When these returns to specialization outweigh costsofcommunication, it is efficient for several agents to collaborate within a firm.