Faculty AI Research

We characterize the joint dynamics of dividends, expected returns, stochastic volatility, and prices. In particular, with a given dividend process, one of the processes of the expected return, the stock volatility, or the price-dividend ratio fully determines the other two. For example, together with dividends, the stock volatility process fully determines the dynamics of the expected return and the price-dividend ratio.

Results from two groups of biculturals (Hong Kong undergraduates, Chinese Americans) and a group of European Americans in two studies showed that in the presence of applicable cues of a culture, individuals with expert knowledge in the culture spontaneously make inferences about the culture's moral values, producing a Stroop-like effect. Although both biculturals and European Americans made spontaneous cultural inferences from American cultural cues, only biculturals made spontaneous inferences from Chinese cultural cues.

We examine the predictive power of the dividend yield for forecasting future excess returns, cashflows, and interest rates. The ability of the dividend yield to predict excess returns is best visible at short horizons with the short rate as an additional regressor. At short horizons, the short rate strongly negatively predicts excess returns, while at long horizons, the predictive power of the dividend yield is weak. These results are robust in international data and are not due to lack of power.

We consider stock markets in 20 countries to investigate whether the accrual anomaly (Sloan 1996), characterized by U.S. stock prices overweighting the role of accrual persistence, is a local manifestation of a global phenomenon. We explore whether the occurrence of the anomaly is related to country differences in accounting and institutional structures, and examine alternative explanations for its occurrence. We find stock prices overweight accruals in general, with accruals overweighting occurring in countries with a common law relative to a code law tradition.

As different activities cannot be measured or communicated with the same precision, accounting information is often only a partial and unbalanced reflection of the fundamental economics, emphasizing certain aspects of the underlying operations while disregarding others. We highlight this inherent imbalance in information as the source of an interaction between corporate operating and discretionary disclosure strategies, and thereby also as an important determinant of the information acquisition strategy.

This paper examines uncovered interest rate parity (UIRP) and the expectations hypotheses of the term structure (EHTS) at both short and long horizons. The statistical evidence against UIRP is mixed and is currency- not horizon-dependent. Economically, the deviations from UIRP are less pronounced than previously documented. The evidence against the EHTS is statistically more uniform, but, economically, actual spreads and theoretical spreads (spreads constructed under the null of the EHTS) do not behave very differently, especially at long horizons.

The authors propose that individual differences in assertiveness play a critical role in perceptions about leaders. In contrast to prior work that focused on linear effects, the authors argue that individuals seen either as markedly low in assertiveness or as high in assertiveness are generally appraised as less effective leaders. Moreover, the authors claim that observers' perceptions of leaders as having too much or too little assertiveness are widespread.

The first step in any research is to decide what to study. Choosing the right question is essential for producing relevant knowledge. This is not to say that relevance should be subordinate to rigour. They are both important. A relevant question which is analysed rigorously produces valid knowledge that both advances theory and informs practice. A rigorously performed study on an irrelevant question may advance theory but does not inform practice.

Four experiments and a correlational study explored the relationship between power and perspective taking. In Experiment 1, participants primed with high power were more likely than those primed with low power to draw an E on their forehead in a self-oriented direction, demonstrating less of an inclination to spontaneously adopt another person's visual perspective.

This paper uses an analytical model to examine when it makes sense to provide incentives to innovators to adopt a new product. The model allows for separate segments of innovators and imitators, each of which follows a Bass-type diffusion process. Interestingly "seeding" the market is optimal for a limited range of situations and these do not appear to include those where there is a downturn in sales (chasm) as sales move from the first to the second segment.

The comprehensive survey reported here allowed analysis of how senior U.S. financial executives make decisions related to performance measurement and voluntary disclosure. Chief financial officers were asked what earnings benchmarks they cared about and which factors motivated executives to exercise discretion — even sacrifice economic value — to deliver earnings. These issues are crucially linked to stock market performance. The results show that the destruction of shareholder value through legal means is pervasive, perhaps even a routine way of doing business.

We consider organizations that optimally choose the level of adaptation to a changing environment when coordination among specialized tasks is a concern. Adaptive organizations provide employees with flexibility to tailor their tasks to local information. Coordination is maintained by limiting specialization and improving communication. Alternatively, by letting employees stick to some pre-agreed action plan, organizations can ensure coordination without communication, regardless of the extent of specialization.

We characterize supply chain settings in which perfect coordination can be achieved with simple wholesale pricing schemes: either retailer-specific constant unit wholesale prices or retailer-specific volume discount schemes. We confine ourselves to two-echelon supply chains with a single supplier servicing a network of retailers who compete with each other by selecting sales quantities.

Weak public institutions, including high levels of corruption, characterize many developing countries. We demonstrate that this feature has important implications for the design of monetary policymaking institutions. We find that a pegged exchange rate or dollarization, while sometimes prescribed as a solution to the credibility problem, is typically not appropriate for countries with poor institutions. Such an arrangement is inferior to a Rogoff-style conservative central banker, whose optimal degree of conservatism is proportional to the quality of institutions.

Consider a make-to-order manufacturer that offers multiple products to a market of price and delay sensitive users.

In this comment, the author addresses several challenges that must be overcome for a behavioral economics approach to prosper in marketing. First, parameters, such as those for loss aversion, impatience, and related constructs, are useful summaries of more complex processes. Because marketers must understand, explain, and change behavior, a deeper level of understanding of the relationship among these parameters and processes is useful. The second challenge is individual differences. Marketing depends on how people differ.