Proximity to the SEC and Stock Price Crash Risk

We explore the possibility that Securities Exchange Commission (SEC) oversight influences disclosure practices in a manner that reduces the likelihood of individual stock price crashes. Firms located farther from the SEC have greater stock price crash risk and this result is more pronounced for firms with financial statements that are less readable (those with larger 10‐K filings) and more pronounced when SEC budgets are relatively smaller. Similar results are obtained in response to SEC regional office location changes that are more likely to be exogenous. Our results suggest that SEC oversight induces disclosure practices that reduce the likelihood of large negative disclosures.     

The effect of growth opportunities on the market reaction to dividend cuts: evidence from the 2008 financial crisis

We consider returns from rebalanced and buy and hold portfolios consisting of the same stocks. Theoretical properties are derived using Jensen’s inequality and the Hölder’s Defect Formula. Simulations are used to confirm theory and to investigate ambiguous cases where theory is silent. Rebalancing decreases total return volatility, while buy and hold produces greater expected return. Results are more opaque with respect to Sharpe Ratios and expected geometric means. Our empirical tests are based on portfolios composed of the risk-free asset, CRSP market value returns and returns from five Fama–French industries. While rebalancing reduces volatility and momentum effect, our tests largely favor the buy and hold strategy due to the high relative returns enjoyed by stocks vis-a-vis the risk-free asset. Transactions cost for rebalancing the portfolio are economically negligible.     

Have economic educators embraced social media as a teaching tool?

In this article, the authors discuss the results of a study of the perceptions of a national sample of economics faculty members from various institutions regarding the use of social media as a teaching tool in and out of the economics classroom. In the past few years, social media has become globally popular, and its use is ubiquitous among students. As such, some instructors have incorporated social media into their courses to engage students. Others are reluctant to embrace social media, citing privacy concerns, social media being more of a distraction than a useful tool, and the challenge of keeping up with social media developments, among others. The authors characterize economics faculty's perceptions of the use of social media platforms for economic instruction.     

Executive Stock Option Exercise and Seasoned Equity Offerings

We examine executive stock option exercises around a sample of 1,268 seasoned equity offerings (SEOs) from 1996 to 2004 focusing on a subset of exercises we identify as potentially informed. Consistent with the theory that firms issue equity when stock is overvalued, we document a surge in informed exercise in the months surrounding the SEO. From six months prior to the announcement date to six months after issuance, an average 1.76% of the total market capitalization for issuing firms is exercised and sold. Interestingly, we find a positive association between informed option exercises and long-run performance. Overall, our collective evidence indicates that insiders are not particularly good at timing exercises around SEOs.     

ON THE DELIBERATE CENTRALITY OF AN INVISIBLE HAND: REPLY TO GAVIN KENNEDY,RYAN HANLEY AND CRAIG SMITH

We previously showed that ‘led by an invisible hand’ was physically central in original editions of The Theory of Moral Sentiments and The Wealth of Nations. We suggested that Adam Smith did that deliberately. Three authors commented on our paper, Gavin Kennedy, Ryan Hanley and Craig Smith. In this article we reply to their comments.     

Involving mind, body, and friends: Management that engenders creativity

Based on the careful observation and interviews of employees at three companies, and supplemented by cases from the popular business press, a discovery approach is used to derive four management principles that engender creativity and innovation in organizations: (1) manage organizations so that their knowledge base is more diverse than what would occur naturally; (2) encourage employees to embrace a collaborative and non-complacent attitude towards work and the organization; (3) make it possible for organization members to engage in the quick testing of ideas and solutions as they emerge; (4) reward employee and supervisor behaviors that support these principles and punish resistance to their implementation. The principles work in companies even if creativity and innovation are not stated organizational objectives, and do not require large investments or disruptions to work processes to yield valuable results.     

Household preference revisions and decision making: The role of disconfirmation

In this paper, we examine the role of disconfirmation as an important determinant of household preference revisions and decision making. Although prior research has examined decision influence and information exchange in household decision making, the impact of disconfirmation on individual family member preferences and the joint household preference has not been explicitly studied. Analogous to the main types of social influence found within groups, we identify two types of disconfirmation that impact individual preferences arising from family interaction or discussion. These two types of disconfirmation are informational disconfirmation, related to new product information revealed in family discussion being different than one's prior beliefs, and preference disconfirmation, where a family member has incorrect expectations of the preferences of other influential household members. An empirical study involving a household vacation decision demonstrates significant disconfirmation effects in explaining individuals' post-discussion preferences, as well as the joint household preference and decision. Based on the empirical results, we discuss various implications and suggest future research to study the specific consequences of disconfirmation in household decisions.     

Ooh,that's sour: An investigation of the role of sour taste and color saturation in consumer temptation avoidance

This paper draws on the theory of embodied cognition to argue that sensory imagery and consumer recall of past experiences of sour tastes inspire sour taste perceptions that trigger facial muscle activation, which in turn leads to temptation avoidance. Across four experiments, we show that physical action need not be performed to elicit temptation avoidance. Moreover, our findings show that the effects of visual gustatory imagery are more pronounced when presented against a visual red background low on color saturation. Interestingly, they are not significant in the presence of a high color saturation background. We also discuss the implications of these findings for sensory marketing, alternative consumer strategies to avoid temptation, and visual brand management in the consumer experience economy.     

Costs of in-house genomic profiling and implications for economic evaluation: a case example of non-small cell lung cancer (NSCLC)

Abstract

Objectives

Genomic profiling in oncology is vital for determining eligible patients for mutation-specific targeted therapies. Use of commercial genomic testing has the potential to improve patient outcomes. Economic evaluations of in-house genomic profiling typically only include material costs while external commercial services include many other factors. Using non-small cell lung cancer (NSCLC) as an example, this study sought to characterize the unique challenges of costing testing services and their impact on results of economic evaluations.     

AgriStability with Catastrophic Price Risk for Cow-Calf Producers

AgriStability is the primary Canadian agricultural risk management program. Recent experience with bovine spongiform encephalopathy (BSE) in the cattle sector demonstrated that output prices are susceptible to both “normal” risk and sudden, “catastrophic” declines. This paper evaluates the AgriStability program for cow-calf producers when there is potential for catastrophic price risk. A simulation model is developed. Under a base case scenario, when there is no catastrophic price risk, AgriStability behaves more like an income support program than a risk management tool. Risk-neutral producers see a 12.1% increase in certainty equivalent wealth compared to 12.5% for moderately risk-averse producers. Introducing catastrophic price risk increases risk-averse producers’ expected benefits to 21.8%. Actuarially fair program premiums and implied subsidies are also estimated. These results demonstrate that AgriStability is highly subsidized. Finally, benefits from supplementary catastrophic revenue insurance are calculated and discussed, along with several additional structural features of the program. Agri-stabilité constitue le principal programme canadien de gestion des risques en agriculture. L'encéphalopathie spongiforme bovine qui a frappé le secteur de l’élevage bovin a démontré que les prix des extrants sont exposés à des risques « normaux » et à des chutes soudaines et « catastrophiques ». Le présent article évalue le programme Agri-stabilité dans le cas des producteurs vache-veau (veaux d’embouche) lorsqu’un potentiel de risque de prix catastrophique existe. Nous avons élaboré un modèle de simulation. Dans le cadre d’un scénario de référence, lorsqu’il n’existe pas de risque de prix catastrophique, le programme Agri-stabilité ressemble davantage à un programme de soutien du revenu qu’à un outil de gestion des risques. Dans le cas des producteurs indifférents aux risques, l’équivalent certain de la richesse aléatoire est supérieur de 12,1 % comparativement à 12,5 % dans le cas des producteurs modérément risquophobes. L'introduction de risque de prix catastrophique augmente les bénéfices espérés des producteurs risquophobes de 21,8 %. Nous avons également estimé ce que représentent les indemnités actuariellement justes ainsi que les subventions implicites. Les résultats ont montré que le programme Agri-stabilité est très subventionné. Finalement, nous avons examiné et calculé les indemnités tirées d’une assurance-revenu supplémentaire en cas de risque catastrophique et nous avons aussi analysé plusieurs autres caractéristiques structurelles du programme.