A new paper co-authored by Prof. Lawrence Schmidt examines why investors tend to make good purchasing decisions, but poor selections when it comes to selling stocks, reports The Economist. The researchers found that the “disparity between sales and purchases is explained by the attention given to each.”
Axios reporter Kaveh Waddell writes that a group of economists led by Prof. Erik Brynjolfsson has proposed creating a new metric to measure GDP that accounts for the value of free digital goods and new technologies. The researchers estimate that “hidden benefits from Facebook alone have added 0.05–0.11 percentage points to GDP every year since its 2004 launch,” Waddell explains.
New York Times columnist David Leonhardt highlights Prof. Emeritus Olivier Blanchard’s address to the American Economic Association, in which he argued that governments are overly concerned with debt. “Blanchard’s case revolves around the fact that economic growth rates in modern times are usually higher than interest rates. This pattern means that governments can often repay their debts more easily than people expect,” Leonhardt explains.
Tom Loftus of The Wall Street Journal highlights a study co-authored by MIT Prof. Maryam Farboodi that finds big data plays an important role in raising capital from investors and could contribute to the growing divide between large and small companies.
Prof. Simon Johnson reviews Adam Tooze’s new book, “Crashed: How a Decade of Financial Crises Changed the World” for The Washington Post. Johnson writes that the book, “is an impressive narrative history, weaving together events from around the world with a light touch and a great deal of helpful explanation.”
In an article for the Financial Times, John Gapper highlights a study by Prof. John Van Reenen examining the increasing concentration of industries. Van Reenen explains that globalization and new technology foster superstar companies because “network effects mean that small quality differences can tip a market to one or two players.”
Axios reporter Dan Primack writes about a new study by Prof. Antoinette Schoar examining the performance of sidecar private equity funds. Primack explains that Schoar and her colleagues found that, “GP-directed sidecar funds had worse average performance than did the main funds raised at the same time by the same firms, while discretionary co-investment funds were basically a wash.”
In an article for The Wall Street Journal, Senior Lecturer Robert Pozen argues that having the Securities and Exchange Commission switch to semiannual reporting would not encourage more firms to make long-term investments. Pozen notes that, “a better idea for reforming financial reporting would be for firms to stop issuing ‘guidance’ on their earnings for the next quarter or year.”
Sloan senior lecturer Robert Pozen and undergraduate Ming Lu contributed this article to Fortune about the dangers of having too much employer stock in your 401(k). “[P]ast performance is not a good predictor of future performance—especially in this era of disruptive innovation,” they explain.
Writing for the Financial Times, Senior Lecturer Robert Pozen argues that the European Union needs to improve their efforts to restrict “ratings shopping.” Pozen writes that the European Securities and Markets Authority, “should establish a central and accessible system of public disclosures on both initial approaches and final ratings by each EU issuer of a structured bond.”
Prof. Andrew Lo speaks with Lisa Mullins of WBUR’s All Things Considered about investing in biotech. Lo explains that, “if we can use finance to reduce the risk, we will actually be able to bring lots more capital into the industry and be able to get therapies to patients faster.”
Coryanne Hicks of U.S. News & World Report highlights research by Prof. Andrew Lo and graduate student Pablo Azar in an article about using Twitter to spot financial trends. The study predicted market shifts based on the emotional context of tweets, finding that "when people start to get nervous, you can detect that very clearly," says Lo.
Camila Russo of Bloomberg reports on Gary Gensler’s comments at MIT Technology Review’s Business of Blockchain conference. Gensler, a visiting lecturer at Sloan and former chair of the Commodity Futures Trading Commission, said many cryptocurrenciers “are operating outside of U.S. laws.”
Gary Gensler, a top financial regulator in both the public and private sector, spoke with Nathaniel Popper of The New York Times about virtual currencies and the need for regulation. This fall, Gensler will hold dual appointments at Sloan and the Media Lab, “where he will write and teach about the potential he sees for blockchains to change the financial world.”
Deepa Seetharaman of The Wall Street Journal speaks to Michael Casey, Senior Advisor for Blockchain Opportunities at the Digital Currency Initiative about new uses for blockchain and its potential to cut costs. “[B]ecause of all of this reconciliation, all of this multiple back-checking” Casey suggests that logistics and the financial sector are two areas that will benefit from blockchain technology.