Research articles for the 2020-11-21

Alternative Work Arrangements, Payout Policy, and Employment: Evidence from Independent Contractor Misclassification Statute
Hwang, Ji Hoon
Using the 2004 Massachusetts Independent Contractor Law that discourages the use of independent contractors, I find that firms adopt conservative financial policies by reducing payout since companies attempt to reduce financial risk in response to increased operating leverage. I find that the effect is more pronounced in industries with a higher proportion of independent contractors, and in firms with high financial constraints and operating leverage. I also find that the state government’s attempt to improve the mis-classified worker’s status reduces the number of employees at the firm level by 4.4%, highlighting that reclassification does not lead to an increase in the number of employees. The findings imply that heightened operating risk caused by the law may lead to risk-averse financial policies and subdued job creation at the firm level.

Analyst Corporate Site Visits and Stock Price Crash Risk
Wang, Jun
This paper examines the impact of analyst corporate site visits on stock price crash risk using a unique data set of Chinese A-share stocks listed on the Shenzhen stock exchange (SZSE) over the 2012â€"2019 period. We find that the frequency of analyst corporate site visits is positively correlated with stock price crash risk, and this positive relationship is mainly significant in the situation that analysts keep silent after visiting. This positive association remains robust after using alternative measures of crash risk and analyst silence. The results still hold after re-estimating our regression using the Heckman self-selection model to control for selection bias. Finally, we find that analyst silence, which happens after visits participated by more than one brokerage, star analysts, or fund companies, has a more significant impact on stock price crash risk.

Common Ownership along the Supply Chain and Supplier Innovations
Chen, Xian
Common owners are the (institutional) investors that hold equities of multiple firms. This paper examines the impact of common ownership of suppliers and customers on suppliers' innovation activities. I find suppliers' investment in innovation, quantity and quality of innovation output increase when common owners control higher fractions of them and their customers. The impact of vertical common ownership on innovation input and quality of innovation output is stronger and more robust than that of horizontal common ownership. I provide plausible evidence for causality using a difference-in-differences approach based on a quasi-natural experiment in the form of financial institution mergers and acquisitions. Moreover, I test the potential channels through which vertical common ownership could influence supplier innovation. My evidence suggests that common ownership increases investment in innovation by mitigating hold-up issues between suppliers and customers, and enhances innovation output performance by improving technological spillovers between suppliers and customers. Overall, my evidence suggests that common institutional ownership enhances suppliers' innovation performance by improving relationships between suppliers and their customers.

Financing Correlated Drug Development Projects
Lo, Andrew W.,Siah, Kien Wei
Current business models have struggled to support early-stage drug development. In this paper, we study an alternative financing model, the mega-fund structure, to fund drug discovery. We extend the framework proposed in previous studies to account for correlation between phase transitions in drug development projects, thus making the model a more realistic representation of bio-pharma research and development. In addition, we update the parameters used in our simulation with more recent estimates of the probability of success (PoS). We find that the performance of the mega-fund becomes less attractive when correlation between projects is introduced. However, the risk of default and the expected returns of the vanilla mega-fund remain promising even under moderate levels of correlation. In addition, we find that a leveraged mega-fund outperforms an equity-only structure over a wide range of assumptions about correlation and PoS.

Integrasi Pasar Saham Kawasan Perdagangan Bebas Asean - China (The Asean Free Trade Zone - China Stock Market Integration)
Endri, Endri
Indonesian abstract: Studi ini mengkaji integrasi integrasi pasar saham diantara ASEAN-5 yaitu Indonesia, Malaysia, Filipina, Singapura dan Thailand plus China. Menggunakan data harian untuk tanggal 2 Januari 2003 sampai Periode 31 Desember 2009, penelitian mempekerjakan Johansen dan Juselius prosedur kointegrasi multivariat. Secara khusus, studi ini mempertimbangkan apakah pasar ASEAN-5 plus China terintegrasi atau tersegmentasi menggunakan teknik time series kointegrasi untuk mengekstrak jangka panjang hubungan. Hasil empiris menunjukkan bahwa ASEAN-5 plus China pasar saham terkointegrasi dan karenanya tidak sepenuhnya tersegmentasi dengan batas negara. Namun, hanya ada satu vektor kointegrasi, menyisakan empat kecenderungan umum di antara lima variabel. Karena itu kami menyimpulkan bahwa pasar saham ASEAN-5 plus Cina terintegrasi di pengertian ekonomi, tetapi integrasi itu masih jauh dari selesai. Tentang kebijakan tingkat, inisiatif untuk lebih mengintegrasikan pasar saham adalah layak, dan sebenarnya diinginkan. Dari perspektif portofolio internasional investor, manfaat dari diversifikasi portofolio internasional di lima pasar berkurang tetapi tidak dihilangkan.English abstract: This study examines the integration of stock markets integration among ASEAN-5 that is Indonesia, Malaysia, the Philippines, Singapore and Thailand plus China. Using daily data for the January 2, 2003 to December 31, 2009 period, the study employs the Johansen and Juselius multivariate co-integration procedures. In particular, this study considers whether the ASEAN-5 plus China markets are integrated or segmented using the time series technique of co-integration to extract long-run relations. The empirical results suggest that the ASEAN-5 plus China stock markets are co-integrated and are thus not completely segmented by national borders. However, there is only one co-integrating vector, leaving four common trends among the five variables. We therefore conclude that ASEAN-5 plus China stock markets are integrated in the economic sense, but that integration is far from complete. On a policy level, initiatives to further integrate the stock markets are feasible, and in fact desirable. From the perspective of the international portfolio investor, benefits of international portfolio diversification across the five markets are reduced but not eliminated.

Killing in the Stock Market: Evidence From Organ Donations
Barnes, Spencer
Daily individual patient records for every organ transplant capable hospital in the United States from 1987 to 2018 indicate a negative relationship between stock market returns and deaths. Stress related deaths, such as heart attacks, strokes, and suicides, are the most pronounced around stock market movements. Market shifts also alter the availability of organ transplants creating life altering consequences for organ wait list patients. A geographic effect exists within states as well. An interrupted time series specification mitigates some endogeneity concerns. The findings imply that wealth shocks alter current utility even at the extremes emphasizing the spillover effects of finance.

Mean-Reversion Risk, Autocorrelation APT and the Autocovariance CAPM
Jones, C. Kenneth
I derive a single period, inter-temporal, static APT that values asset time-interval risks. Uncorrelated mean-reversion risk factors form an exact factor structure APT. An equilibrium multi-beta CAPM with long-term mean-reversion betas is developed. I define mean-reversion risk by using digital signal processing to decompose risk into orthogonal time horizon risks. Risks are measured relative to factor portfolios, or the market. Mean-reversion betas give a linear relationship between expected return and multiple horizon risk premiums. Calendar and non-calendar length risks have unique prices. Auto-correlation, arbitrage-pricing theory (A-APT), and the auto-covariance, capital asset pricing model (A-CAPM) determine the prices of long-horizon risks.

Revisiting Momentum Profits in Emerging Markets
Butt, Hilal Anwar,Kolari, James W.,Sadaqat, Mohsin
This study investigates the cross-sectional and time-series properties of momentum returns in 19 emerging market countries. In general, consistent with previous studies, momentum strategies in emerging markets underperform those in the U.S. and other developed markets. To help reconcile these differences, we show that momentum profits are negatively exposed to market and liquidity factors, which is more important in down market states. Given higher market returns and lower liquidity in emerging markets, this negative exposure tends to increase momentum crashes when market rebounds after depressed market conditions and, in turn, lower momentum returns in emerging market countries. Finally, risk management of momentum reduces exposure to market and liquidity factors, thereby boosting returns, Sharpe ratios, and asset pricing model alphas.

Risk Premium Bounds: Slackness Tests and Return Predictions
Back, Kerry,Crotty, Kevin,Kazempour, Seyed Mohammad
Martin (2017) and subsequent authors derive lower bounds for risk premia on the market portfolio and for individual stocks using option prices. If the bounds are tight and the options market is informationally efficient, then the bounds must be the best possible predictors of returns. We test the bounds conditionally and find that they are valid in all market conditions but are not tight in all market conditions. Slackness is significant and predictable. Adding predicted slackness to a bound produces a return predictor that is superior to using the bound alone.

The Price and Quantity of Interest Rate Risk
Carpenter, Jennifer N.,Lu, Fangzhou,Whitelaw, Robert
Studies of time-varying government bond risk premia that do not account for corresponding time variation in bond risk are incomplete. This paper provides evidence that (1) bond risk premia are solely compensation for bond risk, as no-arbitrage theory predicts, (2) both bond return volatility and the price of that risk vary stochastically, and (3) there is an important time-varying second factor in expected returns. We estimate the joint dynamics of the volatility and the Sharpe ratio of returns on the first and second principal-component bond-factor portfolios in both the US and China. In all four cases, volatility dynamics play a fundamental role in the dynamics of risk premia, and bond factor Sharpe ratios vary stochastically. In the US, VIX is a significant predictor of bond factor volatility and price of risk, incremental to yield-curve level, slope, and curvature.

Управление на масовите възприятия (Mass Perceptions Management)
Hristov, Chavdar,Kalinov, Bogomil,Georgiev, Boyan,Kalinov, Kalin,Koleva, Boyana,Mindova, Ventsislava,Tzvetkova, Elena,Geshev, Lyuben,Veleva, Miliana,Paralovska, Petia
Bulgarian Abstract: Колективната монография „Управление на масовите възприятия“ обобщава научните резултати от изследванията на докторантите по „Убеждаваща комуникация“ в докторската програма „Медии и комуникации” на Факултета по журналистика и масова комуникация при Софийски университет „Св. Климент Охридски“. Издава се с помощта на Фонд „Научни изследвания” на Софийския университет „Св. Климент Охридски” с договор â„–80-10-85/15.04.2019 г. Авторският екип с научен ръководител проф. д-Ñ€ Чавдар Христов работи с единен научен подход, оперира с метода на моделирането и доказва комуникационната природа на Матрицата Homo Sapiens в базовите ѝ ракурси: Феноменология на матрицата Homo Sapiens; Управление на масовите възприятия чрез сторителинг; Модел на влияние чрез филмов наратив; Модел на влияние върху консумативното поведение; Модел на дирижирани трансформации в масовото мислене и поведение; Модел на влияние чрез национални литературно-исторически митове; Модел на символно влияние â€" архитектурният кръст на София; Модел на влияние чрез музика; Модел на влияние чрез спорт; Модел на влияние чрез карикатура; Модел на влияние чрез геополитическа преса и визуална комуникация; Модел на влияние чрез визуална комуникация в социалните мрежи. Ð' монографията се защитава тезата за човешкото матрично мислене и поведение, което позволява да се оказва дирижирано убеждаващо въздействие върху големи групи от хора. Тя е концептуализирана от гледна точка на генетични, когнитивни и социални доминанти, конфигуриращи общи за Homo Sapiens черти в процеса на неговата биологична и социална еволюция.English Abstract: The co-authors monograph “Mass Perceptions Management” summarizes the research results of doctoral studies in the PhD programme at the University of Sofia in “Persuasive Communication”, led by Professor PhD Chavdar Hristov. The main hypothesis in the present monograph is built upon the idea of the human matrix thinking and behavior, which enables the managed persuasive impact on large groups of people. The research is conceptualized on the basis of genetic, cognitive and social dominants, which configure common characteristics of Homo Sapiens in the process of the biological and the social evolution. It is worth noting that the social evolution continues in line with the ideological and technological changes within the global context. The aim of these changes is the unification of the thinking and the actions of the majority of people â€" a form of constant battle for the “hearts and minds”. The challenge is to replace a set of ideological imperatives with a new one, describing the dynamics of the ongoing process as an “anthropological revolution”. Such alterations can be observed in the countries in Eastern Europe, particularly in Bulgaria, where the last few decades are dedicated to the affirmation of liberal and democratic values. The results can be observed among young people even if they are still partially hybridized by the conflict between old and new. We can project, based on previous social experience, that the ideological changes will be more dominant with each new generation, resulting in a common European values identification. It should be noted that the anthropological revolution is rather an accelerated evolution, which requires the change of several generations in order to reach the sought after mental and behavior unification. Which in turn is a prerequisite for management of the masses for the benefit of the elites. The monograph tries to uncover the mechanisms of mass communication influence by structuring effective persuasion models from the fields of storytelling, film and ideological narratives, consumerism, symbolic interaction, music, national identification, satire, managed indoctrination and societal rituals. Each of the twelve chapters of the book is based on the personal research interest of the authors to different aspects of the topic, which can be further extended and diversified to present new evidence to support the core thesis of the monograph regarding the susceptibility of the Homo Sapiens matrix to managed persuasive influence within an unpredictable and highly technological cyber world. The book consists of twelve chapters with end-notes added to each chapter, a bibliography and an index. The content of each chapter is the sole responsibility of the authors involved and do not necessarily represent the official views of the Sofia University. The publication was supported by the Sofia University Science Fund under the Grant of the scientific project (Contract No80-10-85/15.04.2019) in collaboration with the scientific project entitled “Scientific monograph in the conditions of digital transformation and open access to scientific information” (Contract No80-10-85/15.04.2019). The e-book was published on the 1st of October, 2020 (ISBN 978-954-8194-98-3) with a total number of 388 pages.