Why Student Debt Relief May Fall Short of Its Good Intentions
As the U.S. staggers beneath the weight of its education debt – a crushing $1.6 trillion in 2020 – there are increasing calls for loan forgiveness. But debt forgiveness plans need to be crafted carefully or they might actually disproportionately favor high-income individuals or specific ethnic groups. A duo of Finance researchers, Sylvain Catherine of Wharton School and Constantine Yannelis of Chicago Booth School of Business, explains how to tailor such policies to better redistribute their benefits. Sylvain Catherine is a HEC Paris PhD alumnus.
Real Effects of Dividend Taxes: A Natural Experiment From Switzerland
Any tax inexorably distorts the behaviour of economic agents, and dividend taxation is no exception to this rule. However, accurately assessing the impact of a tax reform on economic activity remains a difficult if not impossible task. Indeed, a change in tax rules affects the whole economy, and it is difficult to attribute a change in the behaviour of economic agents to the reform rather than to the evolution of the economic situation. This article reviews a change in Swiss tax policy that allowed us to precisely assess how listed companies react to a reduction in dividend taxation.
Why Do Investors Trade on Unverified Rumors?
Stock prices occasionally move in response to unverified rumors. These rumors often concern corporate takeovers and are associated with a surge in stock returns and trading activity. As CNBC stock expert Herb Greenberg succinctly observed: “Takeover rumors have always been part of the game of Wall Street, but there are times they fly so quickly you don't have time to consider the sources.” Why do investors trade based on unverified rumors?
Real Estate Returns Are Lower Than You Think
National trends for housing data over the last decades seem to indicate that housing prices climb steadily. Even during the pandemic, certain real estate markets are showing record prices. Yet a new study, with unusual access to minute detail, indicates that over the long term, real estate as an investment is decidedly lukewarm.
How Activist Short Sellers Police Financial Markets
New research analyzes how activist short sellers’ “research reports” convince investors that the companies they target are overvalued. Professors Luc Paugam and Hervé Stolowy of HEC Paris and Yves Gendron of the Université Laval found that the share price of companies targeted by major activist short sellers drop by 11.2%, on average, over three days. Target firms are also more likely to be subsequently delisted, suspended from stock exchanges, or to go bankrupt. Who are activist short sellers and how do they police financial markets?
“A $%^* Sexist Program”: Detecting and Addressing AI Bias
A major issue facing companies that use AI, algorithmic bias can perpetuate social inequalities — as well as pose legal and reputational risks to the companies in question. New research at HEC Paris offers a statistical method of tracking down and eliminating unfairness.
How Unemployment Insurance Can Foster Business Dynamism
Research by Johan Hombert (HEC Paris) recently published in The Journal of Finance shows that well-designed unemployment insurance is key to foster business dynamism. As unemployment is surging in the wake of COVID-19, the post-crisis policy toolkit should take special care of the design of unemployment insurance.
A New Theory in Economics Helps Predict Future Events
When will be the next financial crisis? Who is going to win the next US presidential elections? How do we create beliefs about such events? By understanding how probabilistic beliefs form, economic theorists can now explain and predict phenomena that depend on rational beliefs. Latest research by Rossella Argenziano and Itzhak Gilboa equips economic modeling with a theory and a set of tools of belief formation, based on statistics and psychology. Some of the immediate applications are the equilibrium selection in coordination games.
Optimal Firm Management and Welfare Maximizing Policies
In early 2020, the European Research Council (ERC) granted €450 million for Europe’s long-term research, because “Europe’s future depends on science and research", reminded Mariya Gabriel, European Commissioner for Innovation, Research, Culture, Education and Youth. Among 185 winning researchers, with expertise ranging across all fields, HEC Paris Professor Bruno Biais was awarded for his research project in finance, entitled "Welfare, Incentives, Dynamics, and Equilibrium". He explains it in this interview.