Decision Making & Negotiations

In late 2013, Bloomberg LP, the financial information powerhouse, was challenged by a competing messaging service owned by a consortium of banks, many of whom were Bloomberg's customers. This development came when growth was slowing and news was emerging that Bloomberg's business practices may have compromised the privacy of its customers. Did these events serve to open fissures in the company's ability to maintain industry dominance? This case asks students to consider Bloomberg's business model and the industry's competitive landscape to assess the company's market position.

Using country index returns from 8 developed countries and 8 emerging market countries, we re-explore the benefits to international diversification over the past 30 years. To examine various theories in a comparable way, we intentionally limited ourselves to an examination of country index returns and a limited number of types of investments.

We propose an approach for using individual-level data on social interactions (e.g., number of recommendations received by consumers, number of recommendations given by adopters, number of social ties) to improve the aggregate penetration forecasts made by extant diffusion models. We capture social interactions through an individual-level hazard rate in such a way that the resulting aggregate penetration process is available in closed form and nests extant diffusion models.

We examine changes in banks' market-to-book ratios over the last decade, focusing on the dramatic and persistent declines witnessed during the financial crisis. The extent of the decline and its persistence cannot be explained by the delayed recognition of losses on existing financial instruments. Rather, it is declines in the values of intangibles — including customer relationships and other intangibles related to business opportunities — along with unrecognized contingent obligations that account for most of the persistent decline in market-to-book ratios.

Do people know when they are seen as pressing too hard, yielding too readily, or having the right touch? And does awareness matter? We examined these questions in four studies. Study 1 used dyadic negotiations to reveal a modest link between targets' self-views and counterparts' views of targets' assertiveness, showing that those seen as under- and over-assertive were likely to see themselves as appropriately assertive.

We use panel data to examine the prediction of Merton's intertemporal CAPM that time varying risk premiums arise from the conditional covariances of returns on assets with the return on the market. We find a positive and significant risk-return tradeoff that is driven by the time series variation in the conditional covariances, and the risk-premium on the market remains positive and significant after controlling for additional state-variables. Our estimation method allows us to estimate the risk-return tradeoff in the ICAPM using a large number of test assets.

We propose a simple approach to dynamic multi-period portfolio choice with quadratic transaction costs. The approach is tractable in settings with a large number of securities, realistic return dynamics with multiple risk factors, many predictor variables, and stochastic volatility. We obtain a closed-form solution for a trading rule that is optimal if the problem is restricted to a broad class of strategies we define as "linearity generating strategies" (LGS).