Monthly Archives

October 2019

Student Seminar #12: Manipulation and the Allocational Role of Prices

Monday, October 14, 2019
(22 Mehr 1398)
12:30 – 13:30
Kourosh Khansary
Khatam University (@ 17 Daneshvar), 7th Floor, Seminar Room

“It is commonly believed that prices in secondary financial markets play an important allocational role because they contain information that facilitates the efficient allocation of resources. This paper identifies a limitation inherent in this role of prices. It shows that the presence of a feedback effect from the financial market to the real value of a firm creates an incentive for an uninformed trader to sell the firm’s stock. When this happens the informativeness of the stock price decreases, and the beneficial allocational role of the financial market weakens. The trader profits from this trading strategy, partly because his trading distorts the firm’s investment. We therefore refer to this strategy as manipulation. We show that trading without information is profitable only with sell orders, driving a wedge between the allocational implications of buyer and seller initiated speculation, and providing justification for restrictions on short sales. “

Required Reading(s)
Manipulation and the Allocational Role of Prices


Student Seminar #11: Anticompetitive Effects of Common Ownership

Monday, October 07, 2019
(15 Mehr 1398)
12:30 – 13:30Esmaeil AliabadiKhatam University (@ 17 Daneshvar), 7th Floor, Seminar Room

“Many natural competitors are jointly held by a small set of large institutional investors. In the U.S. airline industry, taking common ownership into account implies increases in market concentration that are 10 times larger than what is “presumed likely to enhance market power” by antitrust authorities.1 Within‐route changes in common ownership concentration robustly correlate with route‐level changes in ticket prices, even when we only use variation in ownership due to the combination of two large asset managers. We conclude that a hidden social cost—reduced product market competition—accompanies the private benefits of diversification and good governance.”

Required Reading(s)
Anticompetitive Effects of Common Ownership


Student Seminar #10: How Smart Is Smart Money?

Monday, September 30, 2019
(08 Mehr 1398)
12:30 – 13:30Ramtin SalamatKhatam University (@ 17 Daneshvar), 7th Floor, Seminar Room

“I find that companies funded by more experienced VCs are more likely to go public. This follows both from the direct influence of more experienced VCs and from sorting in the market, which leads experienced VCs to invest in better companies. Sorting creates an endogeneity problem, but a structural model based on a two‐sided matching model is able to exploit the characteristics of the other agents in the market to separately identify and estimate influence and sorting. Both effects are found to be significant, with sorting almost twice as important as influence for the difference in IPO rates.”

Required Reading(s)How Smart Is Smart Money? A Two‐Sided Matching Model of Venture Capital