Reassessing the dependence between economic growth and financial conditions since 1973

Adrian, Boyarchenko and Giannone ((2019), ABG) adapt quantile regression (QR) methods to examine the relationship between US economic growth and financial conditions. We confirm their empirical findings, using their methodology and their pre-2016 sample. Mindful of the importance of the Covid-19 pandemic, we extend the sample to 2021Q3 and find attenuation of the key estimated coefficients using ABG's empirical methods. Given the pandemic observations, we provide robust QR analysis of dependence based on ranked data and explain the relationship with extant copula modelling methods.     

Institutional investor distraction and innovation

Prior studies suggest high institutional ownership provides stable funding for firm managers supporting long-term innovation. However, we hypothesize that the level of holdings can also proxy for institutional attention. We address this question and find that institutional distraction negatively impacts board monitoring and advisory support for management, reducing R&D, patent filings, citations and creativity. Distraction is concentrated in (1) firms owned by institutions providing low attention before the shock and (2) industries facing low substitute monitoring through competition. Distraction also affects information flow in firms facing high labour mobility and high peer firm innovation (technology spillovers).