Research workshop held in conjunction with the Northern Finance Association (NFA) annual conference

Workshop opens, presentation: Attention Allocation and Fund Flows: Evidence from Institutional Investors

With more than $40 trillion dollars under management, institutional investors of funds play an important role in the financial market. Using novel data on fund viewership, we are the first to examine how these investors allocate attention to specific institutional funds. Exploiting quasi-random variation in screen display features on a prominent institutional asset management platform as instruments, we provide causal evidence that their attention drives flows to institutional funds and exerts positive price pressure on their underlying stocks. Overall, our evidence suggests that even sophisticated institutional fund investors face attention constraints, which have important asset pricing implications.

Presentation: Institutional Ownership and Cross-Border Spillovers of Monetary Policy

We find that Canadian stocks with greater ownership by institutional investors from the United States (US) are more sensitive to US monetary policy surprises. Upon a 25 basis point contractionary monetary policy surprise, a firm with one standard deviation greater US ownership share sees its stock returns lowered by an additional 41.6 basis points, or is 62.9 percent more sensitive. These firms also reduce their debt and capital expenditures by a greater margin. Neither revenue dependence on the US nor the signaling effect of the Fed on the Bank of Canada appears to drive these findings. Our results are robust to foreign exchange rate channels, and consistent with US institutional investors transmitting Federal Reserve policy shocks to foreign equity markets through portfolio demand, with real effects amplified by external financing constraints.

Presentation: Data, Markup, and Asset Prices

This paper investigates how data technology affects firms’ market power and asset prices. Using a novel dataset tracking firms’ employment of data scientists, we document three key empirical findings: firms with higher proportions of data scientists exhibit larger markups, have higher information quality proxied by lower sales forecast errors, and earn higher stock returns. Specifically, a long-short portfolio strategy based on firms’ data scientist ratios generates significant annual excess returns of approximately 4\%. To quantitatively rationalize these empirical findings, we develop a heterogeneous firm model in which firms optimally hire data scientists to learn about unobserved consumer tastes. The model demonstrates how data enables firms to improve demand forecasting accuracy and extract higher markups. Importantly, supply-constrained firms have stronger incentives to hire data scientists, leading to countercyclical data scientist hiring that amplifies their exposures to aggregate risk through an operating leverage channel. We provide empirical evidence supporting our model mechanism.

Presentation: Priced Risks in the Century-Long Cross-Section of Corporate Bonds and Stocks

We construct a new historical corporate bond database spanning 128 calendar years to address longstanding data limitations hampering corporate bond research. By hand-collecting monthly corporate bond quotes from three archival print sources, we complement existing datasets and create an extensive database dating back to 1895, comprising nearly 110,000 unique bonds and 8 million observations. Leveraging this expanded sample, we find that the lack of priced risks in corporate bonds documented by recent studies stems from their reliance on short samples. With greater statistical power, we show that prominent bond and stock factors as well as several nontraded macroeconomic factors are significantly priced with theoretically consistent signs. At the same time, the predictive power of corporate bond spreads for real activity is largely robust in the longer sample, except when pre-war data are included. Our database, covering major economic episodes like the Great Depression, not only helps validate previous empirical findings but aims to facilitate further research by serving as a CRSP counterpart for corporate bonds.

Zhi DA

Professor
University of Notre Dame

Professor Zhi Da is the Howard J. and Geraldine F. Korth Professor of Finance at the University of Notre Dame. His research focuses on empirical asset pricing and investment. He is currently serving as an associate editor at several journals including Journal of Finance, Management Science, Journal of Financial and Quantitative Analysis, among others. He is the vice-president elect of the Midwest Finance Association (MFA) and a council member of the Society for Financial Studies (SFS). Zhi has received the 2017 JFQA William F. Sharpe Award for Scholarship in Financial Research, among other research awards and grants. After gaining a BBA and an MSc from National University of Singapore, he worked at the interest rate and exotic derivative trading desk in DBS Bank. He subsequently earned a PhD in Finance from Northwestern University.

Taeuk Seo

Assistant Professor
Université Laval

Taeuk Seo is an Assistant Professor in the Department of Finance, Insurance and Real Estate at Université Laval. His research is at the intersection of macroeconomics and finance, and asks how asset prices and the real economy shape one another. His current projects study the role of ambiguity aversion in explaining labour market fluctuations, and the role of institutional investors in the cross-border spillovers of US monetary policy. His work on discount rates and unemployment fluctuations is published in Management Science. Before his doctoral studies, Taeuk worked as an economist at the Bank of Korea. He subsequently earned a PhD in Finance from the Ross School of Business at the University of Michigan.

Alexandre Corhay

Associate Professor
University of Toronto

Alexandre Corhay is an Associate Professor of Finance at the Rotman School of Management, University of Toronto. His research focuses on asset pricing, macro-finance, and firm dynamics, with particular interests in how firm market power and government policy, both fiscal and monetary, affect risk and the macroeconomy via firms. Alex’s research has been published in leading finance and economics journals, including the Journal of Finance, the Review of Financial Studies, the Journal of Financial Economics, and the Review of Economic Studies. He is also an award-winning teacher, having been named one of Poets&Quants’ Top 50 Undergraduate Business Professors.

Sébastien Plante

Professeur adjoint
Université du Wisconsin à Madison

Sebastien Plante is an Assistant Professor of Finance at the Wisconsin School of Business, University of Wisconsin-Madison. He joined the Wisconsin School of Business faculty in June 2018 upon completing his PhD at the Wharton School. Professor Plante’s research interests are in microstructure, credit markets, liquidity, and corporate finance.