Finance - Research Publications

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    The value of growth: Changes in profitability and future stock returns
    Lim, B ; Sotes-Paladino, J ; Wang, GJ ; Yao, Y (Elsevier BV, 2024-01-01)
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    Dissecting the listing gap: Mergers, private equity, or regulation?
    Lattanzio, G ; Megginson, WL ; Sanati, A (Elsevier BV, 2023-05)
    The abnormal decline in the number of U.S. public firms is often blamed on merger activity, private equity investments, and stock market regulations. We compare the effects of these channels in a unified framework. In the U.S., an extra 100 mergers is associated with 22.01 additional missing public firms, whereas an extra 100 PE deals is associated with 3.62 fewer missing public firms. Regulatory changes contribute to the decline of U.S. listings too. We also specify the types of deals that most strongly affect listings. Finally, we document that similar listing gaps emerge in other developed economies.
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    The effect of action contingency on social perception is independent of person-like appearance and is related to deactivation of the frontal component of the self-agency network.
    Hamamoto, Y ; Takahara, Y ; Dos Santos Kawata, KH ; Kikuchi, T ; Suzuki, S ; Kawashima, R ; Sugiura, M (Springer Science and Business Media LLC, 2022-10-15)
    The detection of object movement that is contingent on one's own actions (i.e., movements with action contingency) influences social perception of the object; such interactive objects tend to create a good impression. However, it remains unclear whether neural representation of action contingency is associated with subsequent socio-cognitive evaluation of "contacting agents", or whether the appearance of agents (e.g., face- or non-face-like avatars) is essential for this effect. In this study, we conducted a functional magnetic resonance imaging (fMRI) task with two phases: contact (contact with face- or non-face-like avatars moving contingently or non-contingently) and recognition (rating a static image of each avatar). Deactivation of the frontoparietal self-agency network and activation of the reward network were the main effects of action contingency during the contact phase, consistent with previous findings. During the recognition phase, static avatars that had previously moved in a contingent manner deactivated the frontal component of the frontoparietal network (bilateral insula and inferior-middle frontal gyri), regardless of person-like appearance. Our results imply that frontal deactivation may underlie the effect of action contingency on subsequent social perception, independent of person-like appearance.
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    Insider trading
    Balogh, A (Springer Science and Business Media LLC, 2023)
    This paper describes a dataset capturing insider trading activity at publicly traded companies. Investors and investment analysts demand this information because executives, directors and large shareholders are expected to have more intimate knowledge of their company’s prospects than outsiders. Insider stock sales and purchases may reveal information about the firm’s business not disclosed in financial statements. They may also convey new information predictive of stock price movements if insiders can better interpret public information about the firm. Since mid-2003, the Securities and Exchange Commission has made these insider trading reports available to the public in a structured format; however, most academic papers use proprietary commercial databases instead of regulatory filings directly. This makes replication challenging as the data manipulation and aggregation processes are opaque and historical records could be altered by the database provider over time. To overcome these limitations, the presented dataset is created from original regulatory filings; it is updated daily and includes all information reported by insiders without alteration.
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    Permanent private equity: Market performance and transactions
    McCourt, M (WILEY, 2022-06)
    Abstract Using market data for a comprehensive sample of publicly listed permanent capital private equity funds, I confirm existing results in the private equity literature and establish new empirical facts for private equity investments. Over 2000–2019, only mezzanine funds outperformed public markets, whereas buyout, growth, and funds of funds underperformed somewhat, and venture capital funds underperformed significantly. Buyout funds exhibit performance persistence. Larger funds with higher asset turnover have higher performance, and funds with higher expenses have lower performance. Finally, contemporaneous and out‐of‐sample performance of buyout and mezzanine funds is associated with deal and exit transaction characteristics.
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    Forecasting variance swap payoffs
    Dark, J ; Gao, X ; van der Heijden, T ; Nardari, F (WILEY, 2022-12-01)
    Abstract We investigate the predictability of payoffs from selling variance swaps on the S&P500, US 10‐year treasuries, gold, and crude oil. In‐sample analysis shows that structural breaks are an important feature when modeling payoffs, and hence the ex post variance risk premium. Out‐of‐sample tests, on the other hand, reveal that structural break models do not improve forecast performance relative to simpler linear (or state invariant) models. We show that a host of variables that had previously been shown to forecast excess returns for the four asset classes, contain predictive power for ex post realizations of the respective variance risk premia as well. We also find that models fit directly to payoffs perform as well or better than models that combine the current variance swap rate with a realized variance forecast. These novel findings have important implications for variance swap sellers, and investors seeking to include volatility as an asset in their portfolio.
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    Task-independent metrics of computational hardness predict human cognitive performance
    Franco, JP ; Doroc, K ; Yadav, N ; Bossaerts, P ; Murawski, C (NATURE PORTFOLIO, 2022-07-28)
    The survival of human organisms depends on our ability to solve complex tasks in the face of limited cognitive resources. However, little is known about the factors that drive the complexity of those tasks. Here, building on insights from computational complexity theory, we quantify the computational hardness of cognitive tasks using a set of task-independent metrics related to the computational resource requirements of individual instances of a task. We then examine the relation between those metrics and human behavior and find that they predict both time spent on a task as well as accuracy in three canonical cognitive tasks. Our findings demonstrate that performance in cognitive tasks can be predicted based on generic metrics of their inherent computational hardness.
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    Inferences regarding oneself and others in the human brain.
    Suzuki, S (Public Library of Science (PLoS), 2022-05)
    The human brain can infer one's own and other individuals' mental states through metacognition and mentalizing, respectively. A new study in PLOS Biology has implicated distinct brain regions of the medial prefrontal cortex (PFC) in metacognition and mentalizing.
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    Time to acquire: Regulatory burden and M&A activity
    Balogh, A ; Creedy, U ; Wright, D (Elsevier BV, 2022-07)
    Firms go public to make acquisitions, but private firms benefit from lower regulatory cost. Investment by newly public firms may be limited if managers need to focus on compliance instead of growth. Exploiting a 2012 US policy reform, we show that when regulatory cost is lower, firms make more acquisitions, do so more quickly after listing, and also increase other forms of investment. Examining potential unintended consequences of reduced regulation, we find that opportunistic bidding arising from higher information asymmetry does not explain these results. We inform the ongoing policy debate on broadening the scale and scope of regulatory relief.
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    Evolution of a dealer trading network and its effects on art auction prices
    De Silva, DG ; Gertsberg, M ; Kosmopoulou, G ; Pownall, RAJ (ELSEVIER, 2022-05)