Experience Stern | Faculty & Research

"An exodus of senior officials from a presidential administration toward the end of a term is not an uncommon phenomenon. The officials have put in their time. They have tried to contribute to better policy (at least, in their view). So it is time for them to move on. But to see several senior economists leave the Trump administration during the past few weeks is extremely unsettling— especially in these fraught times. Tomas Philipson, who had been the Acting Chair of the Council of Economic Advisers (CEA), left at the end of June — allegedly because of too many clashes with the politicos — to return to the University of Chicago." Read More...

"Recent protests demanding social justice and the affirmation of the Black Lives Matter (BLM) movement have provoked a flurry of activity among corporations as they drop brands that have racist connotations, reposition other brands with ambiguous to outright offensive racial implications, explicitly state their solidarity with the movement, and donate money to racial justice causes.

But do consumers perceive these actions as authentic — especially when many of these companies are not Black owned and/or have a lackluster history of Black corporate leadership? And will these strategies result in long-term brand loyalty?" Read More...

"For the unfamiliar: Value investing is a popular investment scheme of buying low-valued stocks (e.g., low market-to-book or price-to-earnings stocks), and selling short highly valued stocks. The natural rebound of the former ('value” stocks) and the price drop of the latter ('growth” stocks) — namely, mean reversion ― generated the gains from value investing in the 1970s and 1980s." Read More...

"Since its launch in 2009, there has been increasing interest in Bitcoin and other cryptocurrencies. Initially mostly discussed in popular media, more recently a growing body of academic research has emerged on the topic, spanning many fields such as macroeconomics, law and economics, and computer science. This column focuses on the microeconomics of cryptocurrencies, specifically on their supply, demand, trading price, and the competition amongst different cryptocurrencies. It summarises the main findings in this literature over the past decade and establishes a base for future research." Read More...

"At the start of the year, when COVID-19 was barely on anyone's radar outside of China, the global economy was entering a fraught phase, facing a range of potentially devastating tail risks. And though the pandemic has since turned the world on its head, all of these threats remain – and some have become more salient." Read More...

"Observers of the diverse and often challenged American public pension system look north to Canada with a certain degree of admiration. Canadian public pension plans tend to be fully funded — some even have healthy surpluses. Most U.S. plans are in deficit, and several are unlikely to be sustainable. So what makes the Canadian system better? The inevitable response has to do with better governance. But it goes a lot deeper. It is the legal structure of Canadian public pension plans that enables strong governance." Read More...

"The ultra-low US policy rates that followed the 2008 Global Crisis have been coincident with significantly large positive shareholder payouts by US firms, or in other words, negative net equity issuances, largely due to higher share buybacks (repurchases) than ever in the past. Net share repurchases and total shareholder payouts (the sum of net share repurchases and dividend payouts) have increased steadily since 2001 (in absolute terms as well as relative to assets), especially so in the past decade, reaching a peak of more than $800 billion in 2018. Over this period, fixed business investment growth has failed to keep pace with firm assets, leading to lower normalised investment despite cheap funding due to aggressive monetary easing and favorable tax reforms." Read More...

"Yesterday, the State Department’s Commission on Unalienable Rights issued its draft report, the culmination of a yearlong study by a group of scholars and activists, chaired by Mary Ann Glendon of Harvard Law School, and chosen by Secretary of State Mike Pompeo. He convened the Commission to elaborate on the core principles framing the US approach to human rights, which Pompeo referred to yesterday as “our enduring dedication to unalienable rights and our tradition of constitutional self-government.” The Commission’s report has some troubling aspects, but what is most striking is the stunning gap between the broad principles the Commission articulates and the dramatic abandonment of these principles by the current administration, both at home and abroad." Read More...

"Central bank independence — the ability of central bankers to make policy without interference from political authorities — became the holy grail of monetary economists in the 1990s. It was agreed that independence from political pressure was the bulwark that protected the world's economies from inflation." Read More...

"Facebook and the other social media companies are at a crossroads, in this country and around the world. The Stop Hate for Profit campaign shows that business as usual will no longer suffice. As politicians of both parties call for reform, these companies must do more than make public statements and attach labels. Instead, they should reexamine their core business models and accept responsibility for moderating their sites in a way that comports with their values and their public commitments to be a force for good." Read More...

"What is the relevance of such asset write-offs, often of staggering amounts, to investors? Is it a signal to dump the stock, as some Shell investors did on June 30?" Read More...

In a joint op-ed, Professor Marti Subrahmanyam suggests that the U.S. needs an act of solidarity, as exemplified by Alexander Hamilton in 1790, to combat the coronavirus budget crisis. Read More...

In the wake of George Floyd’s killing in Minneapolis, activist demands for defunding the police have reverberated across the country. Even if these steps are taken, the “new normal” of policing will provide only a partial solution for the underlying problem – the racial injustice and inequality that is deeply ingrained in our society. In order to effectively combat racism and persistent inequality, we must begin actively educating our youth, as early as preschool, before attitudes form and develop into deep-seated prejudice. Read More...

It seems investors don’t much care about the impact of data breaches on stock prices. This confounds the idea that the first line of defense against cyber-attacks should be market discipline - channeled from investor reactions through asset managers’ portfolio decisions, board governance and manager action - to get much more serious about cyber-safeguards. The evidence suggests the market-discipline defense is a lot weaker than it should be. Read More...