Small numbers are processed on a linear scale, while large numbers are processed on a logarithmic scale. In this paper, we show that financial analysts process small prices and large prices differently. When they are optimistic (pessimistic), analysts issue more optimistic (pessimistic) target prices for small price stocks than for large price stocks. Our results are robust when controlling for the usual risk factors such as size, book-to-market, momentum, profitability and investments. They are also robust when we control for firm and analyst characteristics, or for other biases such as the 52-week high bias, the preference for lottery-type stocks and positive skewness, and the analyst tendency to round numbers. Finally, we show that analysts become more optimistic after stock splits. Overall, our results suggest that a deeply-rooted behavioral bias in number processing drives analysts’ return expectations.
That is from Tristan Roger, Patrick Roger, and Alain Schatt, via the excellent Kevin Lewis.
Here is the tweet thread. Self-recommending.
Hurry while there is still time to apply to the 2018 Public Choice Outreach Conference, a crash course in public choice for students planning careers in academia, journalism, law, or public policy will held June 9-10 in Arlington VA. Graduate students and advanced undergraduates are eligible to apply. Students majoring in economics, history, international studies, law, philosophy political science, psychology, public administration, religious studies, and sociology have attended past conferences. Speakers include Tyler Cowen, Robin Hanson, Bryan Caplan, Shruti Rajagopolan and many others.
You can find an application and more information here. If you are a professor please invite your students to apply.
Here is the transcript and audio, and this is the intro:
Marc Andreessen has described Balaji as the man who has more good ideas per minute than anyone else in the Bay Area. He is the CEO of Earn.com, where we’re sitting right now, a board partner at Andreessen Horowitz, formerly a general partner. He has cofounded the company Counsyl in addition to many other achievements.
Here is one excerpt:
COWEN: Why is the venture capital model so geographically clustered? So much of it is out here in the Bay Area. It’s spreading to other parts of the country. Around the world, you see Israel, in some ways, as being number two, per capita number one. But that’s a very small country. Why is it so hard to get venture capital off the ground in so many areas?
SRINIVASAN: That’s actually now changed with the advent of ICOs and Ethereum and crypto. Historically, the reason for it was companies would come to Sand Hill Road. One maybe slightly less appreciated aspect is, if you come to Sand Hill Road and you get VC financing, the VC who invests in your company typically takes a board seat. A VC does not want to fly 6,000 miles for every board seat if they’ve got 10 board seats and four board meetings a year per company.
What a VC would like in general, all else being equal, is for you to be within driving distance. Not only does that VC like it, so does the next VC in the B round and the next VC in the C round. That factor is actually one of the big things that constrains people to the Bay Area, is VC driving distance, [laughs] because VCs don’t want to do investments that are an entire world away.
With the advent of Ethereum and ICOs, we have finally begun to decentralize the last piece, which was funding. Now, that regulatory environment needs to be worked out. It’s going to be worked out in different ways in different countries.
But the old era where you had to come to Sand Hill to get your company funded and then go to Wall Street to exit is over. That’s something where it’s going to increasingly decentralize. It already has decentralized worldwide, and that’s going to continue.
COWEN: With or without a board seat, doesn’t funding require a face-to-face relationship? It’s common for VC companies to even want the people they’re funding to move their endeavor to the Bay Area in some way, not only for the board meeting. They want to spend time with those people.
We’re doing this podcast face to face. We could have done it over Skype. There’s something significant about actually having an emotionally vivid connection with someone right there in the room. How much can we get around that as a basic constraint?
And here is another:
COWEN: Right now, I pay financial fees to my mutual funds, to Merrill Lynch, all over. Anytime I save money, I’m paying a fee to someone. Which of those fees will go away?
SRINIVASAN: Good question. Maybe all of them.
COWEN: Why? What will they do that we haven’t thought of?
SRINIVASAN: Construction. There’s different kinds of drones. They’re not just flying drones. There’s swimming drones and there’s walking drones and so on.
Like the example I mentioned where you can teleport into a robot and then control that, Skype into a robot and control that on other side of the world. That’s going to be something where maybe you’re going to have it in drone mode so it walks to the destination. You’ll be asleep and then you wake up and it’s at the destination.
Drones are going to be a very big deal. There’s this interesting movie called Surrogates, which actually talks about what a really big drone/telepresence future would look like. People never leave their homes because, instead, they just Skype into a really good-looking drone/telepresent version of themselves, and they walk around in that.
If they’re hit by a car, it doesn’t matter because they can just rejuvenate and create a new one. I think drones are very, very underrated in terms of what they’re going to do.
Do read or listen to the whole thing.
That is the topic of my latest Bloomberg column, here is my opener:
Paul Krugman recently made a splash in a New York Times column by suggesting there are no “serious, honest, conservative intellectuals with real influence,” referring to the “unicorns of the intellectual right.” I largely agree with his criticisms, but I would like to offer a very different perspective. This column is my corresponding warning to the left, like when somebody tells you your shirt is not properly tucked in.
Here is one passage, but there is much more:
Religion has been a major force in world history, and today is no exception. The popular intellectual who probably has made the biggest splash this year, Jordan Peterson, describes himself as a Christian. Right-wing intellectuals, overall, aren’t nearly as religious as is the broader right-wing electorate. Still, I find they are much better suited to understand the role of religion in life than are left-wing intellectuals. For intellectuals on the left, the primary emotional reaction to religion is to see it as a force standing in the way of social liberalism, feel awkward about how many Americans are still religious, and then prefer to change the topic.
I see the main victims of the political correctness movement as standing in the center or center-left. In fact, some intellectual superstars, such as Peterson or Steven Pinker, have thrived and received enormous attention by attacking political correctness. But if you don’t have a big public audience, you work in a university, and you wish to make a point about race or gender that isn’t entirely along “proper” lines, you will probably keep your mouth shut or suffer the consequences. Those intellectual victims are not mainly on the right, and it means the left has ended up somewhat blind on these issues. This underlying dysfunction is a big reason the left was so surprised by the election of President Donald Trump.
Do read the whole thing.
Leland was a great monetary economist, a wonderful economist outright, an important early member of the Virginia School, one of the best read people I’ve met, and he could speak and read eight languages, including Swedish. He was also a wonderful expositor, and a fine gentleman altogether. He was either an early or a late proponent of market monetarism, depending on how you wish to mark the calendar. Most memorably to me, he would entertain my pesky questions about economics, without tiring, even when I was at a young age. I am sorry to see him go. Here is Leland on Wikipedia and other entries.
Not that much. From Jesse Rothstein:
Chetty et al. (2014b) show that children from low-income families achieve higher adult incomes, relative to those from higher income families, in some commuting zones (CZs) than in others. I investigate whether children’s educational outcomes help to explain the between-CZ differences. I find little evidence that the quality of schools is a key mechanism driving variation in intergenerational mobility. While CZs with stronger intergenerational income transmission have somewhat stronger transmission of parental income to children’s educational attainment and achievement, on average, neither can explain a large share of the between-CZ variation. Marriage patterns explain two-fifths of the variation in income transmission, human capital accumulation and returns to human capital each explain only one-ninth, and the remainder of the variation (about one-third) reflects differences in earnings between children from high- and low-income families that are not mediated by human capital. This points to job networks and the structure of local labor and marriage markets, rather than the education system, as likely factors influencing intergenerational economic mobility.
Here is the NBER working paper.
It’s so bad that three agencies — the Federal Bureau of Investigation, the U.S. Education Department and the D.C. Office of the Inspector General — are now investigating the D.C. Public School system.
This is after the revelation earlier this year that more than 900 students — a third of the capital’s entire graduating class — were not eligible for the diplomas they were given.
Add to that the bombshell last week that the school system is full of residency fraud — a good chunk of the kids who come to D.C. schools don’t even live in the city. This is happening at the highest levels, investigations showed. The executive assistant to former schools chancellor Kaya Henderson, Angela Williams-Skelton, hauled her grandkids from their Frederick, Md., home to a D.C. public school every day, right under the chancellor’s nose.
And then we have the resignation of one of Bowser’s most influential and prestigious appointments, the schools chancellor picked to follow Henderson, Antwan Wilson. He resigned because of the way his daughter got to leapfrog hundreds of D.C. students on a waitlist to get into the school she wanted.
Here is more from Petula Dvorak at The Washington Post. As far as I can tell this has not been a major news story, and the main point of this particular article is to suggest that D.C. voters do not seem to care very much either. Here are two related Scott Alexander posts.
The student “Outing Club,” which has gone backpacking, kayaking, and hiking in state parks over the course of its 98-year-existence, will no longer be allowed to host outdoor events after administrators conducted a risk assessment, according to The Pittsburgh Post-Gazette.
“The types of activities in which [Penn State Outing Club] engages are above the university’s threshold of acceptable risk for recognized student organizations,” according to an official announcement.
A key issue for administrators was that the Outing Club frequently visit locations with poor cell phone coverage. This wasn’t an issue during the Coolidge administration, but now that cell phones exist, students are apparently expected to remain glued to them at all times.
“Student safety in any activity is our primary focus,” Lisa Powers, a Penn State spokeswoman, told The Post-Gazette.
And yet the treasurer of the Outing Club said that he hadn’t heard of any injuries sustained on club outings in recent years.
I will be doing a Conversation with her, here is part of her Wikipedia entry:
Elisa New…is a Professor of English at Harvard University. She holds a B.A. from Brandeis University (1980), as well as a M.A. and a Ph.D from Columbia University (1982 and 1988, respectively). Her interests include American poetry, American Literature-1900, Religion and Literature, and Jewish literature. Before moving to Harvard, she taught at the University of Pennsylvania.
So what should I ask her?
Ice-breaker question I came up with a few years ago that I call the “off-diagonal” question: Tell me about something you love doing that you’re terrible at. And tell me about something you really do not like doing that you’re great at.
That is from Mike Kim on Twitter.
Parag Pathak, a Massachusetts Institute of Technology professor whose research suggests that school choice can lead to improved student performance, won the John Bates Clark award for contributions from a young economist.
Pathak, 37, was honored for his work on market design and education policy, the Nashville, Tennessee-based American Economic Association said Friday in a statement on its website. It said his work “blends institutional knowledge, theoretical sophistication, and careful empirical analysis to provide insights that are of immediate value to important public-policy issues.”
That is from Bloomberg. Here is scholar.google.com. There is lots on his home page. Only 808 Twitter followers! His Wikipedia page is good. He is a protege of Al Roth, and overall this prize is a victory for the notion of market design.
Can somebody explain the logic of the European “we forgot to make the doors go all the way” shower/bath?
That is from Alex Rampell. Here are the lame answers from the otherwise excellent Twitter.
The idea of inserting “social-psychological interventions” into learning software is gaining steam, raising both hopes and fears about the ways the ed-tech industry might seek to capitalize on recent research into the impact of students’ mindsets on their learning.
…Publishing giant Pearson recently conducted an experiment involving more than 9,000 unwitting students at 165 different U.S. colleges and universities. Without seeking prior consent from participating institutions or individuals, the company embedded “growth-mindset” and other psychological messaging into some versions of one of its commercial learning software programs. The company then randomly assigned different colleges to use different versions of that software, tracking whether students who received the messages attempted and completed more problems than their counterparts at other institutions.
The results included some modest signs that some such messaging can increase students’ persistence when they start a problem, then run into difficulty. That’s likely to bolster growth-mindset proponents, who say it’s important to encourage students to view intelligence as something that can change with practice and hard work.
But the bigger takeaway, according to Pearson’s AERA paper, is the possibility of leveraging commercial educational software for new research into the emerging science around students’ attitudes, beliefs, and ways of thinking about themselves.
There are many arguments for the use of models in economics, including notions of rigor and transparency, or that models can help you to see relationships you otherwise might not have expected. I don’t wish to gainsay those, but I thought of another argument yesterday. Models are a way of indexing your thoughts. A model can tell you which are the core features of your argument and force you to give them names. You then can use those names to find what others have written about your topic and your mechanisms. In essence, you are expanding the division of labor in science more effectively by using models.
This mechanism of course requires that models are a more efficient means of indexing thoughts than pure words or propositions alone. In this view, it is often topic names or book indexes or card catalogs that models are competing with, not verbal economics per se.
The existence of Google therefore may have lowered the relative return to models. First, Google searches by words best of all. Second and relatedly, if you have written only words Google will help you find the related work you need, scholar.google.com kicks in too. In essence, there is a new and very powerful way of finding related ideas, and you need not rely on the communities that get built around particular models (though those communities largely will continue).
It is notable that open access, on-line economics writing doesn’t use models very much and is mostly content to rely on words and propositions. There are several reasons for this, but this productivity shock to differing methods of indexing may be one factor.
Still, it is not always easy to search by words. Many phrases — consider say “free will” — do not through search engines discriminate very well on the basis of IQ or rigor.