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Research Roundtable: Frontiers in Data Analytics

October 28, 2019

EB_GreenPeople

 

 

9:00-9:30 am

Coffee & registration


9:30 sharp

Welcome & Opening Remarks

Susan Christoffersen, William A. Downe BMO Chair in Finance, Vice-Dean, Undergraduate and Specialized Programs, Co-Academic Director, TD Management Data and Analytics Lab, Professor of Finance, Rotman School of Management, University of Toronto

Matthew Mitchell, Co-Academic Director TD Management Data and Analytics Lab, Professor of Economic Analysis and Policy, Rotman School of Management, University of Toronto

Morning sessions

9:45 am

Price Revelation from Insider Trading: Evidence from Hacked Earnings News

 

Charles Martineau, Assistant Professor of Finance, Department of Management, Rotman School of Management, University of Toronto Scarborough

Abstract: From 2010-2015, a group of convicted traders accessed earnings information hours before their public release by hacking several major newswire services. We use their “insider" trading as a natural experiment to investigate how efficiently markets incorporate private information in prices. 15% of a firm's earnings surprise was incorporated into its stock price prior to its public release when the hackers had access to non-public information. Volume and spread-based measures of informed trading detect this activity, but order ow-based measures do not. We find evidence that uninformed, professional traders traded in the same direction, amplifying the impact of informed trading.

 

10:15 am

Can Making Family Salient Increase Financial Savings? Quantifying Heterogeneous Treatment Effects in Voluntary Retirement Contributions Using a Field Experiment in Mexico

Avni Shah, Assistant Professor of Marketing, Department of Management, University of Toronto Scarborough

Abstract: We use evidence from a large-scale field experiment in Mexico (N=97,149) to test the effectiveness of various behavioral interventions on voluntary retirements savings contributions. Specifically, we use SMS reminders to test whether previously successful behavioral interventions (e.g., basic alerts, pennies-a-day, fresh start, individual goal security) or a previously undocumented behavioral intervention---framing retirement savings as a way to `secure your family's financial future'---influences contribution rates in comparison to those who did not receive a text. We found that a family security SMS intervention significantly increased voluntary contribution savings and was more effective than previously used interventions.  Using recently developed machine-learning techniques to quantify the heterogeneity in the treatment, we found that women under the age of 29 were nearly 67% less likely to contribute when given this family intervention compared to no intervention at all, while individuals between 29-41 were 68% more likely to contribute, regardless of gender. The heterogeneity in the treatment effects has important managerial implications: We demonstrate that sending this intervention to all account holders would increase profits by $375,800 pesos ($19,032 USD). In contrast, a strategic application of this intervention to profitable individuals only would increase profits by $4,887,000 pesos ($246,000 USD). From a consumer welfare perspective, this strategic application would also generate 4,597 new voluntary retirement contributors in comparison to the blanket approach which would generate 2,340 new contributors.

 

10:45 am

Coffee Break


 

11:00 am

Taxing Bank Leverage: The Effects on Bank Asset Allocation and Credit Supply

Claire Celerier, Assistant Professor of Finance, Rotman School of Management, University of Toronto

Abstract: Regulators can monitor bank leverage either by increasing capital requirements or taxing debt. We show in a simple model that, while increasing capital requirements leads banks to shift their assets away from loans, taxing debt makes them refocus their activity on lending. We test empirically these predictions by exploiting the staggered introduction of tax reforms that increased the cost of leverage in the Euro-area from 2005 to 2012. In addition to decreasing leverage, affected banks relatively increased lending and decreased total risk. Our results suggest that taxes can be a complementary tool to capital requirements that maintains credit supply.

 

11:30 am

Combining Choices and Response Times in the Field: a Drift-Diffusion Model of Mobile Advertisements 

Ryan WebbAssistant Professor of Marketing, Rotman School of Management, University of Toronto

Abstract: We study how choice and response time data from the field can be combined to estimate the effectiveness of manipulating attention to advertisements. We utilize the class of drift-diffusion models — originally developed in psychology and neuroeconomics to jointly explain subjects’ choices and response times in laboratory experiments — to model users’ responses to video advertisements on mobile devices. The combination of response time with choice data allows separate identification of the diffusion processes characterizing users when the ad is playing, as well as when they subsequently whether to click-through on the ad. Our estimates identify two segments of users that also exhibit distinct out-ofsample behaviour including app engagement and in-app spending. Counterfactual simulations utilizing our estimates predict that ads with a 5 second duration yield roughly the same revenue as forcing a user to view the entire thirty-second ad, thus rationalizing the practice of some platforms (e.g. YouTube) where users can skip an ad after 5 seconds.

 

 


12:00 pm

Lunch


 

Afternoon sessions

1:00 pm

Disclosure of emerging trends: Evidence from climate change business opportunities

Jody GrewalAssistant Professor in Accounting, Rotman School of Management, University of Toronto Mississauga 

Abstract: Responding to social, technological and environmental trends can be critical to firm survival and competitiveness. I use the development and sale of low-carbon products in response to the business opportunities that arise from climate change (‘green opportunities’) as the setting to study firm disclosures of emerging trends. I find, on average, firms delay disclosing green opportunities in their 10-K until 2.5 years after disclosing green opportunities in their sustainability report. Despite both disclosure channels providing reliable information about future revenues from low-carbon products, withholding disclosure from the 10-K has capital market implications. A value-weighted portfolio of firms disclosing only in the sustainability report earned an annual alpha of 3.09%, while a portfolio of 10-K disclosers does not earn abnormal returns. Moreover, disclosing only in the sustainability report is accompanied by positive forecast errors and earnings announcement returns. I find that firms disclose more promptly in the 10-K when green revenues are higher, when there is less uncertainty about future green revenues and when there is greater shareholder support for climate change resolutions.

1:30 pm

Cities and Technology Cycles

Ruben Gaetani, Assistant Professor of Strategic Management, Rotman School of Management, University of Toronto Mississauga

Abstract: What determines the success and decline of cities over time? In this paper, we propose that geographical and technological frictions in the diffusion of ideas make the growth trajectory of cities sensitive to technology cycles, defined as long-term shifts in the centrality of some fields in the knowledge space. Using a novel dataset of historical U.S. patents that spans the period 1836-2010, we show that cities with more central innovation activities grow more over the subsequent decades. We also show that diversification makes cities more resilient to technology cycles by guaranteeing a broad spectrum of ideas to draw from as specific fields gain or lose importance. We formalize these notions through a spatial, dynamic theory of innovation and knowledge diffusion. The model replicates these findings and can be used to quantitatively investigate the sources of city growth, decline, and resilience.

 


2:00 pm

Coffee Break


 

2:15 pm

Capital-Reallocation Frictions and Trade Shocks

Pamela Medina Quispe, Assistant Professor, Economics, University of Toronto

Abstract: What are the short- and medium-run effects of an international-trade shock that increases competition for domestic manufacturing firms? We address this question by combining detailed firm-level investment data from several manufacturing industries in Peru, data on the import penetration of Chinese manufacturing goods in Peru, and a quantitative general equilibrium model of trade with heterogeneous firms subject to idiosyncratic shocks. In the data, we find evidence of large frictions that slow down capital reallocation, either through disinvestment or firm exit, in response to negative profitability shocks. These frictions shape the empirical response of reallocation and selection to the increase in Chinese import competition. In our quantitative model, partial investment irreversibility and general-equilibrium forces play a key role in the adjustment to an import-competition shock. The transitional dynamics are slow, with gradual productivity gains over several years. In the short run, investment inaction increases the aggregate productivity wedge relative to a frictionless benchmark.

 

2:45 pm

Data Driven Forecasting and Revenue Management with Exposure Dependent Reference Prices

Opher Baron, Distinguished Professor of Operations Management, Area Coordinator, Operations Management and Statistics Professor of Operations Management, Rotman School of Management, University of Toronto

Abstract: We use data on the retail business of TMall to consider revenue management in the presence of reference prices and its scalable implementation, i.e., tractability for thousands of items. We consider questions as: Does reference price improve demand forecasts and revenue management? And, does considering exposure effects in the formation of reference price forecasts benefit their accuracy and revenue management? Revenue management considers the impact of prices on current and future sales via forecasts. The related literature uses reference price to study this impact empirically and theoretically. It ignores exposure effect on reference price. Moreover, the scalability of revenue management in the presence of reference price effect is not well established. We (I) develop scalable, data driven methodologies to compare the effectiveness of different forecasts, (II) demonstrate these methodologies, (III) introduce models capturing exposure effect on reference price, and (IV) formulate and study theoretically and numerically the revenue management problem when forecasts are reference price-dependent. We provide a foundation for systematic implementation of revenue management in the presence of reference price effects. We (I) formulate the impact exposure effects on reference price and demonstrate the effectiveness of forecasts with reference price effects; and (II) based upon theoretical and numerical results demonstrate that revenue management could benefit from exposure-dependent reference price models in practice. The improved accuracy and robustness of revenue management performance of our forecasting models with reference price and exposure effects support their usage in practice.


3:15 pm

Closing remarks


3:30 pm

Adjourn


 

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