Information interpretation or information discovery: which role of analysts do investors value more?

This study provides evidence that a significant percentage of analyst forecast revisions are issued promptly after a broad set of corporate public disclosures and that investors perceive these prompt revisions as more valuable than nonprompt revisions. These results hold for all revisions, revisions outside of the earnings announcement window, or revisions in weeks preceding the earnings announcements and are also robust to various sensitivity tests. Investors particularly value analysts?? prompt interpretation of earnings announcements, Form 8-K filings, or certain qualitative news. To the extent that prompt revisions are more likely to reflect analysts?? information interpretation role, our results suggest that investors value more highly analysts?? ability to interpret public disclosures, especially less structured or non-financial disclosures, than their ability for information discovery.     

The intertemporal risk-Return relation,investor behavior,and technical trading profits: evidence from the G-7 countries

The intertemporal risk-return relation and investor behavior are both important pricing factors that jointly determine the expected market risk premium. Using the price adjustment process as a control variable, we find that the intertemporal risk-return relation is positive conditional on bad market news, but is non-positive conditional on good market news. This implies that good (bad) market news weakens (strengthens) the positive risk-return relation. The pattern in the distortion of the risk-return relation is consistent with short-term mispricing in which investors overvalue (undervalue) the stock market in reaction to good (bad) market news. We also show that ignoring the price adjustment process in the estimation of the risk-return relation leads to model misspecification and induces an upward (downward) bias in estimates of the relative risk aversion parameter conditional on good (bad) news. Our model of the asymmetric risk-return relation along with the price adjustment process is capable of generating the return dynamics that is attributable to technical trading profits. We suggest that the profitability of technical trading rules is not a violation of market efficiency, but a consequence of trading rules exploiting the asymmetric effect of price changes on the risk-return relation, along with the persistence property of price changes.     

HETEROGENEOUS EFFECTS OF THE ACA MEDICAID EXPANSION ON HOSPITAL FINANCIAL OUTCOMES

This study examines the effect of the Affordable Care Act's Medicaid expansion on hospital financial outcomes. A key innovation relative to prior studies is that we explicitly account for heterogeneity across states in the timing and extent of the expansion as well as across hospital types. We find that Medicaid expansion led to a decrease in uncompensated care expenditures and an increase in average operating margins. The effects were larger in states where the Medicaid expansion led to a greater increase in program eligibility. Operating margins improved most for public hospitals and facilities located in rural areas. (JEL I11, I13, I18)     

OPTIONS TO THE REALM: A COST NEUTRAL PROPOSAL TO IMPROVE POLITICAL INCENTIVES

In this article, we draw on the literature on political property rights, political accountability, and strategic management and entrepreneurship to propose a cost neutral reform aimed at promoting long‐run economic prosperity. We propose replacing politicians' defined benefit pensions with a financial contract that is tied to economic performance. In particular, we propose a contract that pays out a lump sum to a politician 30 years after their election if real gross domestic product per capita is above some preset benchmark. Furthermore, we show that the contract can be priced such that it is cost neutral in terms of present value with a defined‐benefit pension. We argue that this contract provides a net benefit to society. (JEL D70, D72)     

The Morality of “new” CEO Activism

Journal of Business Ethics - CEOs’ social and environmental activism attracts significant public and research interest. Positioned as an expression of personal morality, such activism is...     

Archetyping relationships with companion animals to understand disaster risk-taking propensity

Pets factor into the daily decision-making of many people. Importantly, various characteristics of these human–animal relationships are known to strongly influence pet owners’ risk behaviour and, consequently, their animals’ welfare during disasters. Yet, few studies have examined a range of such characteristics concurrently in order to describe risk propensity differences in these relationships. In this study, 437 Australian companion-animal (pet) owners reported human–animal relational, personality and attitudinal characteristics, to examine differences in stated tendency to act to secure their pet’s welfare whilst risking potential harm in a hypothetical disaster dilemma. Cluster analysis identified five archetypal profiles differing in relational, personality, attitude and risk-propensity characteristics, as well as in stated willingness to risk personal safety for the well-being of a pet. Results suggest that relational archetypes are an effective means of examining pet–owner risk propensity, to better understand owners’ risk-taking to protect their animals from harm during a disaster.     

Institutional convergence: exit or voice?

There is a small but growing literature on the determinants of economic freedom. This paper contributes to this literature in two ways. First, it is empirically shown that β-convergence in economic freedom occurred from 1980 to 2010. Countries with low levels of economic freedom in 1980 “catch up” at a rate of 0.7 percent a year on average, ceteris paribus. Second, the structural characteristics that contribute to this institutional convergence are documented. Conditional convergence estimates suggest democratic institutions do not con- tribute to conditional convergence. Exitability, a variable that captures how easy it is for citizens to “vote with their feet” is related to the change in economic freedom from 1980 to 2010 in a statistically significant manner across all specifications. This provides some preliminary evidence as to the importance of “exit” versus “voice” with respect to the question of institutional change.     

The value of combining the information content of analyst recommendations and target prices

In assessing the usefulness of the analysts’ stock picking advice, the extant literature has largely focused on the profitability of either their stock recommendations or target prices in isolation. In this paper, we examine the profitability of investment strategies that exploit the information analysts convey through revisions in both their stock recommendations and target prices. We find that these strategies significantly outperform the comparable strategies that make use of only one analyst output.