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The valuation process that economic agents undergo for investments with uncertain payoff typically depends on their statistical views on possible future outcomes, their attitudes toward risk, and, of course, the payoff structure itself.…
With the development of artificial intelligence technology, quantitative trading systems represented by reinforcement learning have emerged in the stock trading market. The authors combined the deep Q network in reinforcement learning with…
Subscription services face a difficult problem when estimating the causal impact of content launches on acquisition. Customers buy subscriptions, not individual pieces of content, and once subscribed they may consume many pieces of content…
We propose a novel family of sales-based rebate mechanisms that induce network effects in sales of products that do not exhibit such externalities. The proposed rebate mechanisms enable the seller of a product with uncertain quality to…
We study the dynamic portfolio selection of an investor who uses deep learning methods to forecast stock market excess returns. In a two-asset allocation problem, deep neural networks -- both feedforward and long short-term memory (LSTM)…
We document the rise of negative earnings between 1980 and 2019: a secular increase in the percent of firms reporting losses, both among public firms and in the broader universe of US corporations, and a secular increase in the persistence…
We propose a new framework to value employee stock options (ESOs) that captures multiple exercises of different quantities over time. We also model the ESO holder's job termination risk and incorporate its impact on the payoffs of both…
In this paper, motivated by the celebrated work of Kelly, we consider the problem of portfolio weight selection to maximize expected logarithmic growth. Going beyond existing literature, our focal point here is the rebalancing frequency…
The gain-loss asymmetry, observed in the inverse statistics of stock indices is present for logarithmic return levels that are over $2\%$, and it is the result of the non-Pearson type auto-correlations in the index. These non-Pearson type…
Net profit is sometimes found from data for net operating surplus. We propose a way to find it from data for consumption, pay and market-value capital, and concomitantly to reveal the factor shares in consumption.
We hypothesize that portfolio sorts based on the V/P ratio generate excess returns and consist of companies that are undervalued for prolonged periods. Results, for the US market show that high V/P portfolios outperform low V/P portfolios…
This paper analyzes the impact of peer effects on electricity consumption of a network of rational, utility-maximizing users. Users derive utility from consuming electricity as well as consuming less energy than their neighbors. However, a…
Cross-sectional dispersion in firm-level realized skewness is significantly and negatively related to future stock market returns. The predictive power of skewness dispersion is robust to in-sample and out-of-sample estimation and is…
We first estimate the average growth of a company's annual income and its variance by using both real company data and a numerical model which we already introduced a couple of years ago. Investment strategies expecting for income growth is…
This paper investigates the financial economics of simple periodic systems. Well-established financial procedures appear to be complicated, and lead to partially biased results. Probability theory is applied, and the focus is on the…
We present a method to compensate statistical errors in the calculation of correlations on asynchronous time series. The method is based on the assumption of an underlying time series. We set up a model and apply it to financial data to…
It is widely assumed that increases in economic productivity necessarily lead to economic growth. In this paper, it is shown that this is not always the case. An idealized model of an economy is presented in which a new technology allows…
How does competition in markets for information affect the creation and division of surplus? We study this question in a search environment in which an agent searches sequentially for a high-quality good and learns about the quality of…
Purpose: A significant number of the non-financial firms listed at the Nairobi Securities Exchange (NSE) have been experiencing declining financial performance which deters investors from investing in such firms. The lenders are also not…
How does import competition from China affect engagement on ESG initiatives by US corporates? On the one hand, reduced profitability due to import competition and lagging ESG performance of Chinese exporters can disincentivize US firms to…