Finance and Financial Management Commons^™

Long-Term Orientation And Tax Avoidance Regulations, Katarzyna Bilicka, Danjue Clancey-Shang, Yaxuan Qi

Economics and Finance Faculty Publications

In this paper, we explore the relationship between the culture of the country where a multinational corporation (MNC) is headquartered and the MNC's stock market reaction to tax avoidance regulations. Specifically, we examine the different responses of MNCs following the implementation of the 2010 UK reform that restricted profit shifting for a specific group of firms. We find that, in countries with short-term-oriented cultures, MNCs affected by this reform experienced positive stock market responses relative to their unaffected counterparts. This is not found in long-term-oriented cultures. This difference in response can partly be explained by the differing perceptions of the …

The Introduction Of Bitcoin Futures: An Examination Of Volatility And Potential Spillover Effects, Benjamin M. Blau, Ryan J. Whitby

Economics and Finance Faculty Publications

Theory in Stein (1987) suggests that introducing derivative contracts, such as futures, can destabilize underlying asset prices if the contracts attract enough speculative traders. This paper examines how the introduction of Bitcoin futures influences the underlying Bitcoin market. Consistent with Stein (1987), we find that that Bitcoin's volatility increases significantly during the post-introduction period. Perhaps more importantly, however, we observe significant spillover effects into related markets. For instance, in other cryptocurrencies, the increase in volatility in these markets is greater than the post-introduction increase in Bitcoin.

Bounded Rationality And The Choice Of Jury Selection Procedures, Martin Van Der Linden

Economics and Finance Faculty Publications

A peremptory-challenge procedure allows the parties to a jury trial to dismiss some prospective jurors without justification. Complex challenge procedures offer an unfair advantage to parties who are better able to strategize. I introduce a new measure of strategic complexity based on level-k thinking and use this measure to compare challenge procedures often used in practice. In applying this measure, I overturn some commonly held beliefs about which jury selection procedures are strategically simple.

Export Competitiveness Of Central And Eastern Europe Since The Enlargement Of The Eu, John Gilbert, Eva Muchová

Economics and Finance Faculty Publications

We use constant market share (CMS) analysis to decompose changes in the export shares of the Central and Eastern European (CEE) economies in the period since the 5th enlargement of the European Union (EU) and measure changes in export competitiveness. We find that the CEE transition economies have generally increased their world export competitiveness, but gains in market share have been tempered by a poor match between both the commodity and regional export profiles of most of the CEE economies and the changes in the world import profile, and by generally slow adaptation of the region to changes in the …

Discounting And Digit Ratio: Low 2d:4d Predicts Patience For A Sample Of Females, Diego Aycinena, Lucas Rentschler

Economics and Finance Faculty Publications

Inter-temporal trade-offs are ubiquitous in human decision making. We study the relationship between preferences over such trade-offs and the ratio of the second digit to that of the forth (2D:4D), a marker for pre-natal exposure to sex hormones. Specifically, we study whether 2D:4D affects discounting. Our sample consists of 419 female participants of a Guatemalan conditional cash transfer program who take part in an experiment. Their choices in the convex time budget (CTB) experimental task allow us to make inferences regarding their patience (discounting), while controlling for present-biasedness and preference for smoothing consumption (utility curvature). We find that women with …

The Integrity Of Financial Analysts: Evidence From Asymmetric Responses To Earnings Surprises, Rui Lu, Wenxuan Hou, Henry Oppenheimer, Ting Zhang

Economics and Finance Faculty Publications

This paper investigates the integrity of financial analysts by examining their recommendation responses to large quarterly earnings surprises. Although there is no significant difference in recommendation changes between affiliated and unaffiliated analysts in response to positive earnings surprises, affiliated analysts are more reluctant than unaffiliated analysts to downgrade stock recommendations in response to negative earnings surprises. The evidence implies that conflicts of interest undermine the integrity of financial analysts. We further examine the effects of reputation concern and the Global Research Analyst Settlement as informal and formal mechanisms, on restoring analysts’ integrity. The results show that the positive bias in …

An Analysis Of Risk-Taking Behavior For Public Defined Benefit Pension Plans, Nancy Mohan, Ting Zhang

Economics and Finance Faculty Publications

This paper presents the first comprehensive study on the determinants of public pension fund investment risk and reports several new important findings. Unlike private pension plans, public funds undertake more risk if they are underfunded and have lower investment returns in the previous years, consistent with the risk transfer hypothesis. Furthermore, pension funds in states facing fiscal constraints allocate more assets to equity and have higher betas. There also appears to be a herding effect in that CalPERS equity allocation or beta is mimicked by other pension funds. Finally, our results suggest that government accounting standards strongly affect pension fund …

Teacher Qualifications And Student Achievement: A Panel Data Of Analysis, Trevor Collier

Economics and Finance Faculty Publications

Recent academic research suggests that teacher quality plays an important role in student achievement: however, empirical research on the efficacy of policies requiring teachers to obtain certain degrees is inconclusive, particularly in elementary education. This paper models a panel data production function with fixed effects using the Early Childhood Longitudinal Study (ECLS-K) to asses the relationship between different undergraduate and graduate majors and elementary student test scores. Specifcally, we aim to discern if there is a difference in teacher efficacy within the different education related majors (e.g. early childhood education and elementary education) and between education and non-education related majors.

What Determines Public Pension Investment Risk-Taking Policy, Nancy Mohan, Ting Zhang

Economics and Finance Faculty Publications

State public pension plans, mostly defined benefit plans, cover pension benefits for 12.8 million active public employees and 5.9 million retirees and other annuitants. However, by the end of 2009, public pension plans had accumulated a total funding deficit of $697 billion (measured by the difference between actuarial pension assets and liabilities). On average, public pension funds cover 75 percent of their liabilities, but individual state results vary greatly.

The 2008 stock market crash strongly affected pension asset value in that equity allocation on average accounted for 56 percent of invested assets. The average 2009 pension asset beta of 0.63 …

Upjohn Institute Policy Paper: Public Pension Crisis And Investment Risk Taking: Underfunding, Fiscal Constraints, Public Accounting, And Policy Implications, Nancy Mohan, Ting Zhang

Economics and Finance Faculty Publications

Public pension funds that cover retirement benefits for almost 20 million active or retired employees have been significantly underfunded. An important, though largely overlooked, issue related to pension underfunding is the excessive investment risk levels assumed by public plans. Our analysis suggests government accounting standards strongly affect public fund investment risk, as higher return assumptions (used to discount pension liabilities) are associated with higher investment risk.

Public funds undertake more risk if they are underfunded and have lower investment returns in previous years, consistent with the risk transfer hypothesis. Furthermore, pension funds in states facing fiscal constraints allocate more assets …

The Impact Of Institutional Arrangements On Educational Efficiency, Trevor Collier

Economics and Finance Faculty Publications

Per-pupil expenditures on education in the United States have grown immensely in recent decades, yet student achievement has been stagnant. An abundance of research has sought to solve this enigma, much of it centered on the incentive structure facing administrators. Some recent papers use TIMSS data to analyze the relationship between institutional arrangements—that typically do not vary within a single country—and student achievement. Similarly, we utilize TIMSS 1999 to determine if there is an indirect relationship between institutional arrangements and student achievement, via a relationship with school efficiency. Our results show that the specified link between institutional arrangements and student …

A Political Model Of Monetary Policy With Application To The Real Fed Funds Rate, Tony Caporale, Kevin B. Grier

Economics and Finance Faculty Publications

We construct an empirical model of U.S. monetary policy assuming that the Federal Reserve is an ordinary federal bureaucracy. We use the real Federal Funds rate as our policy measure and show the existence of significant executive, legislative, and bureaucratic influence on the real rate of interest from 1961 to 1996. We find that presidential party is an adequate statistical measure of executive influence and that the voting scores of the Senate Banking Committee leadership best represent legislative influence. We argue that political changes cause systematic and predictable changes in monetary policy.

The Fischer Black Hypothesis: Some Time-Series Evidence, Tony Caporale, Barbara Mckiernan

Economics and Finance Faculty Publications

We estimate an ARCH-M model to analyze the relationship between the conditional standard deviation of real gross national product (GNP) and its growth rate for the period 1871-1993. We find that variability significantly increases output growth rates. In addition, impulse response functions show that the effect of variability on growth rates is dynamic. These results provide evidence in favor of Black's (1987) business cycle hypothesis.

Tobin, James, Tony Caporale

Economics and Finance Faculty Publications

James Tobin was born in Champaign, Illinois, in 1918. He received his bachelor's degree in 1939 and his master's degree in 1940, both from Harvard. Following naval service during the years 1942-6, he returned to his graduate studies and received his PhD from Harvard in 1947. In 1950, he joined the economics department at Yale University, and he has largely remained at Yale and has been identified with this institution throughout his career. He twice directed the Cowles Foundation for Research in Economics, first from 1955 to 1961, and then from 1964 to 1965. He also served for two years, …