Publications

Factor investing has been around for several decades, backed by an enormous body of literature, and yet it is still surrounded by much confusion and debate. Some of the rhetoric and myths have existed for a long time, while others have arisen in response to the difficult performance from 2018 to 2020 and the subsequent turnaround. This short piece distills the central concepts and practical takeaways of our Fact, Fiction, and Factor Investing article, which examined many claims about factor investing, referencing an extensive academic literature and performing simple, yet powerful, analysis to address those claims.

Although hedonic principles of emotion regulation suggest that people wish to feel good, the current research demonstrates that sometimes feeling good just seems wrong. Specifically, the authors argue that, immediately after viewing moralized content such as human suffering, consumers believe that it is morally appropriate to sustain negative emotions (Study 1). Thus, after exposure to content related to human suffering (vs. other negative content), consumers view subsequent mood-sustaining consumption as morally appropriate and hedonic consumption as morally inappropriate (Study 2). Consequently, they avoid repairing their emotions through hedonic consumption because of their preference to engage in morally appropriate behavior (Studies 3 through 4b); this is particularly true for individuals who view themselves as more moral (Study 4b). These effects are mitigated when the hedonic consumption is morally relevant (Study 4a), rather than prototypically frivolous. This research offers clear prescriptions to marketers about when and when not to offer hedonic consumption as mood repair. By allowing people to pay respect to suffering victims, marketers can give consumers needed space to feel their compassionate emotions

We survey the nascent literature on machine learning in the study of financial markets. We highlight the best examples of what this line of research has to offer and recommend promising directions for future research. This survey is designed for both financial economists interested in grasping machine learning tools, as well as for statisticians and machine learners seeking interesting financial contexts where advanced methods may be deployed.

Despite widespread knowledge and acceptance of the importance of climate-friendly behavior, consumers often fail to take the necessary actions to engage in more sustainable consumption. We propose a framework for structuring reminder messages to drive desired climate-friendly actions in a way that helps consumers build better long-term habits. Specifically, we formally test where to place the reminder in the consumption decision process (refilling of reusable water bottles) and find that simple action-oriented reminders, if placed early in the decision process, where they can benefit from contextual triggers, can motivate habits that endure even after the reminder period has ended. Furthermore, we find that specific sustainability-focused reminders (bringing a reusable bottle or bag) can motivate climate-friendly behaviors without negatively affecting overall consumption of the underlying good.

Despite global commitments and efforts, a gender-based division of paid and unpaid work persists. To
identify how psychological factors, national policies, and the broader sociocultural context contribute
to this inequality, we assessed parental-leave intentions in young adults (18–30 years old) planning to
have children (N = 13,942; 8,880 identified as women; 5,062 identified as men) across 37 countries that
varied in parental-leave policies and societal gender equality. In all countries, women intended to take
longer leave than men. National parental-leave policies and women’s political representation partially
explained cross- national variations in the gender gap. Gender gaps in leave intentions were paradoxically
larger in countries with more gender-egalitarian parental-leave policies (i.e., longer leave available to
both fathers and mothers). Interestingly, this cross-national variation in the gender gap was driven by
cross- national variations in women’s (rather than men’s) leave intentions. Financially generous leave
and gender-egalitarian policies (linked to men’s higher uptake in prior research) were not associated with
leave intentions in men. Rather, men’s leave intentions were related to their individual gender attitudes.
Leave intentions were inversely related to career ambitions. The potential for existing policies to foster
gender equality in paid and unpaid work is discussed

To provide a fuller picture of compliance with ASC 350-20, we hand-collect data to track 893 large acquisitions across time. Our model, which links impairments to post-acquisition accounting and market performance declines as well as acquisition-year attributes, identifies 349 acquisitions as likely to impair. We provide evidence that 65 percent of these at-risk acquisitions impair in the next two years. Our study should be useful to future research as it clarifies the role of hand-collection, market to book ratios, segment-level data, and volatility. We also offer descriptive evidence on impairment patterns. Overall, we find high levels of compliance and little opportunism.

When do people make optimistic forecasts about goal adherence? Nine preregistered studies find that a recent streak of goal-consistent behavior increases the predicted likelihood that the individual will persist, compared to various other patterns holding the rate of goal adherence constant. This effect is due to perceiving a higher level of commitment following a streak. Accordingly, the effect is larger when the behavior requires commitment to stick with it, compared to when the same behavior is enjoyable in its own right. Furthermore, the effect is weaker in the presence of another diagnostic cue of commitment: when the individual has a high historic rate of goal adherence. People also behave strategically in ways consistent with these inferences (e.g., are less likely to adopt costly goal support tools following a streak, choose partners with recent streaks for joint goal pursuit). Together, these results demonstrate the significance of streaky behavior for forecasting goal adherence.

The conduct described in the US complaints against Amazon harms competition between online stores and among the merchants who sell via them.

Several papers argue that financial economics faces a replication crisis because the majority of studies cannot be replicated or are the result of multiple testing of too many factors. We develop and estimate a Bayesian model of factor replication that leads to different conclusions. The majority of asset pricing factors (i) can be replicated; (ii) can be clustered into 13 themes, the majority of which are significant parts of the tangency portfolio; (iii) work out-of-sample in a new large data set covering 93 countries; and (iv) have evidence that is strengthened (not weakened) by the large number of observed factors.

European countries experienced a large increase in labor supply due to the influx of Ukrainian refugees after the 2022 Russia invasion. We study its dynamic effects in a spatial model with forward-looking households of different skills, trade, and endogenous capital accumulation. We find that real GDP increases in Europe in the long term, with large distributional effects across countries and skill groups. In the short run, an increase in the supply of labor strains the use of capital structures that takes time to build. Over time, countries that build capital structures increase output, resulting in potential long run benefits.

Leveraging an established exercise in negotiation education, we build a novel dataset for studying how the use of language shapes bilateral bargaining. Our dataset extends existing work in two ways: 1) we recruit participants via behavioral labs instead of crowdsourcing platforms and allow participants to negotiate through audio, enabling more naturalistic interactions; 2) we add a control setting where participants negotiate only through alternating, written numeric offers. Despite the two contrasting forms of communication, we find that the average agreed prices of the two treatments are identical. But when subjects can talk, fewer offers are exchanged, negotiations finish faster, the likelihood of reaching agreement rises, and the variance of prices at which subjects agree drops substantially. We further propose a taxonomy of speech acts in negotiation and enrich the dataset with annotated speech acts. We set up prediction tasks to predict negotiation success and find that being reactive to the arguments of the other party is advantageous over driving the negotiation.

We review theoretical and empirical work on the economic effects of the United States and China trade relations during the past 20 years. We first discuss the origins of the China shock and its measurement and present methods used to study its economic effects on different outcomes. We then focus on the recent US–China trade war. We review methods used to evaluate its effects, describe its economic effects, and analyze whether this increase in trade protectionism reverted the effects of the China shock. The main lessons learned in this review are that (a) the aggregate gains from US–China trade created winners and losers; (b) China's trade expansion seems not to be the main cause of the decline in US manufacturing employment during the same period; and (c) the recent trade war generated welfare losses, had small employment effects, and was ineffective in reversing the distributional effects due to the China shock.

With $50+ billion in annual sales and operations around the world, Mars Inc. was one of the world’s largest family-held companies. Since its founding, Mars believed in the importance of “mutuality” with groups with which the company interacted. In 1947, then-chairman Forrest Mars, Sr. described “the total purpose for which the company exists” as promoting “a mutuality of service and benefits” among a wide range of stakeholders: consumers, distributors, competitors, direct suppliers, governmental bodies, employees, and shareholders. As a family-owned, family-managed company, this philosophy was understood and passed from one generation to the next.

By the 2010s, few members of the Mars family worked in the company. The family saw a need to codify the ethos of Mars as well as their expectations as shareholders, to articulate what the company was doing and why Mars was doing it.

In 2016, family members and Mars senior management began to develop a framework linking corporate purpose to shareholder objectives. Called “Mars Compass,” the new tool included financial measures as well as a commitment to make a meaningful difference in the lives of people in the company’s extended supply chain.

By spring 2023, Mars had fully embedded Compass into enterprise and segment planning and its regular operating cadence. For the company’s top 400 leaders, Mars Compass was used to determine incentive compensation, including substantial, long-term pay for meeting select sustainability goals. In 2024 this approach was extended to an additional 1,000 leaders. Would Mars Compass work as desired?

This study explores the relationship between migration and household resilience during a global crisis that eliminated the option to migrate. We link prior data from four populations in Bangladesh and Nepal to new phone surveys conducted during the early months of the COVID-19 pandemic. While earnings fell universally, pandemic-induced declines were 14%–25% greater among previously migration-dependent households and urban migrant workers, with household remittance losses far exceeding official statistics. Heightened economic exposure during the pandemic erased prior gains achieved by transnational migrants and caused fourfold greater prevalence of food insecurity among domestic subsistence migrants. Economic distress spilled over onto non-migrants in high-migration villages and labor markets. We show that migration contributed to economic contagion independent of its role in disease transmission. Losing the option to migrate differentially increased the vulnerability of migration-dependent households during a crisis.

We review a program of research examining three questions. First, why is the morality of people's behavior inconsistent across time and situations? We point to people's ability to convince themselves they have a license to sin, and we demonstrate various ways people use their behavioral history and others—individuals, groups, and society—to feel licensed. Second, why are people's moral judgments of others' behavior inconsistent? We highlight three factors: motivation, imagination, and repetition. Third, when do people tolerate others who fail to practice what they preach? We argue that people only condemn others' inconsistency as hypocrisy if they think the others are enjoying an “undeserved moral benefit.” Altogether, this program of research suggests that people are surprisingly willing to enact and excuse inconsistency in their moral lives. We discuss how to reconcile this observation with the foundational social psychological principle that people hate inconsistency.