Selected Publications
Arbitrage Portfolios
( Kim, Soohun | Korajczyk, Robert A | Neuhierl, Andreas )REVIEW OF FINANCIAL STUDIES2021-06
Abstract
We propose a new methodology for forming arbitrage portfolios that utilizes the information contained in firm characteristics for both abnormal returns and factor loadings. The methodology gives maximal weight to risk-based interpretations of characteristics’ predictive power before any attribution is made to abnormal returns. We apply the methodology to simulated economies and to a large panel of U.S. stock returns. The methodology works well in our simulation and when applied to stocks. Empirically, we find the arbitrage portfolio has (statistically and economically) significant alphas relative to several popular asset pricing models and annualized Sharpe ratios ranging from 1.31 to 1.66.
The Deterrent Effect of Ride-Sharing on Sexual Assault and Investigation of Situational Contingencies
( Park, Jiyong | Pang, Min-Seok | Kim, Junetae | Lee, Byungtae )INFORMATION SYSTEMS RESEARCH2021-06
Abstract
Sexual assault is one of the most repellant and costly crimes, which inflicts irrecoverable harms on victims and society. This study examines the effect of information technology (IT)-enabled ride-sharing platforms on sexual assaults. Drawing upon routine activity theory from the criminology literature, we posit that ride-sharing can reduce a passenger's risk of being a suitable target of sexual assault by providing a more reliable and timely transportation option for traveling to a safer place. By exploiting the nationwide quasi-experimental setting of Uber's city-by-city roilouts in the United States during 2005-2017, we demonstrate that Uber's entry into a city is negatively associated with the number of rape incidents. To zoom into the effects of ride-sharing at a more granular level, we employ precinct-hour-level data on Uber pickups and rape occurrences in New York City in 2015 and conduct spatiotemporal analyses. Our results from the spatiotemporal analyses corroborate those of the quasi-experiment and further reveal situational contingencies in the deterrent effect of ride-sharing. Specifically, ride-sharing contributes to a more significant reduction in the likelihood of rape occurrences in neighborhoods with limited transportation accessibility, and ride-sharing is more effective in deterring sexual crime in riskier circumstances, such as around alcohol-serving places on weekend nights or when the probability of crime occurrences increases. This study sheds new light on the potential of IT-enabled platforms to improve social well-being beyond their economic contributions and offers a new theoretical insight on the distinct role of digital platforms in public safety.
When Does Regulation Distort Costs? Lessons from Fuel Procurement in US Electricity Generation: Comment
( Han, Jin Soo | Houde, Jean-Francois | Van Benthem, Arthur A. | Abito, Jose Miguel )AMERICAN ECONOMIC REVIEW2021-04
Abstract
We revisit one of the results in Cicala (2015) and show that the previously estimated large and significant effects of US electricity restructuring on fuel procurement are not robust to the presence of outliers. Using methodologies from the robust statistics literature, we estimate the effect to be less than one-half of the previous estimate and not statistically different from zero. The robust methodology also identifies as outliers the plants owned by a single company whose coal contracts were renegotiated before discussions about restructuring even started.
Positive feedback in coordination games: Stochastic evolutionary dynamics and the logit choice rule
( Hwang, Sung-Ha | Rey-Bellet, Luc )GAMES AND ECONOMIC BEHAVIOR2021-03
Abstract
We study the problem of stochastic stability for evolutionary dynamics under the logit choice rule. We consider general classes of coordination games, symmetric or asymmetric, with an arbitrary number of strategies, which satisfies the marginal bandwagon property (i.e., there is positive feedback to coordinate). Our main result is that the most likely evolutionary escape paths from a status quo convention consist of a series of identical mistakes. As an application of our result, we show that the Nash bargaining solution arises as the long run convention for the evolutionary Nash demand game under the usual logit choice rule. We also obtain a new bargaining solution if the logit choice rule is combined with intentional idiosyncratic plays. The new bargaining solution is more egalitarian than the Nash bargaining solution, demonstrating that intentionality implies equality under the logit choice model. ⓒ 2021 Elsevier Inc.
The Effect of Monetary Policy on Bank Wholesale Funding
( Choi, Dong Beom | Choi, Hyun-Soo )MANAGEMENT SCIENCE2021-01
Abstract
We study how monetary policy affects the funding composition of the banking sector. When monetary tightening reduces the supply of retail deposits, banks attempt to substitute wholesale funding for deposit outflows to smooth their lending. Because of financial frictions, banks have varying degrees of access to wholesale funding. Therefore, large banks, or those with greater reliance on wholesale funding, increase their wholesale funding more. Consequently, monetary tightening increases both the reliance on and the concentration of wholesale funding within the banking sector. Our findings also suggest that liquidity requirements could bolster monetary policy transmission through the bank lending channel. Copyright: ⓒ 2020 INFORMS.
