Results 1  10
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137
Robust Inference with Multiway Clustering
, 2006
"... In this paper we propose a new variance estimator for OLS as well as for nonlinear estimators such as logit, probit and GMM. This variance estimator enables clusterrobust inference when there is twoway or multiway clustering that is nonnested. The variance estimator extends the standard clusterr ..."
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Cited by 348 (4 self)
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In this paper we propose a new variance estimator for OLS as well as for nonlinear estimators such as logit, probit and GMM. This variance estimator enables clusterrobust inference when there is twoway or multiway clustering that is nonnested. The variance estimator extends the standard clusterrobust variance estimator or sandwich estimator for oneway clustering (e.g. Liang and Zeger (1986), Arellano (1987)) and relies on similar relatively weak distributional assumptions. Our method is easily implemented in statistical packages, such as Stata and SAS, that already offer clusterrobust standard errors when there is oneway clustering. The method is demonstrated by a Monte Carlo analysis for a twoway random effects model; a Monte Carlo analysis of a placebo law that extends the stateyear effects example of Bertrand et al. (2004) to two dimensions; and by application to two studies in the empirical public/labor literature where twoway clustering is present.
Costly External Finance, Corporate Investment, and the Subprime Mortgage Credit Crisis,”Working Paper
, 2009
"... We study the effect of the financial crisis that began in August 2007 on corporate investment. The crisis represents an unexplored negative shock to the supply of external finance for nonfinancial firms. We find that corporate investment declines significantly following the onset of the crisis, con ..."
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Cited by 70 (2 self)
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We study the effect of the financial crisis that began in August 2007 on corporate investment. The crisis represents an unexplored negative shock to the supply of external finance for nonfinancial firms. We find that corporate investment declines significantly following the onset of the crisis, controlling for firm fixed effects and timevarying measures of investment opportunities. Consistent with a causal effect of a supply shock, the decline is greatest for firms that have low cash reserves or high net shortterm debt, are financially constrained, or operate in industries dependent on external finance. To address concerns about the endogeneity of firms ’ finances to changes in investment opportunities, we measure these financial positions as much as four years prior to the crisis and confirm that we do not find similar results following placebo crises in the summers of 20032006. We also do not find similar results following the negative demand shock caused by the events of September 11. These effects weaken considerably beginning in the third quarter of 2008, when the demandside effects of the crisis became apparent, suggesting that supply constraints may no longer have been binding. Additional analysis suggests an important precautionary savings motive for seemingly excess cash that has not been emphasized in the literature.
NonHomotheticity and Bilateral Trade: Evidence and a Quantitative Explanation” 33
, 2009
"... The standard gravity model predicts that trade flows increase in proportion to importer and exporter total income, regardless of how income is divided into income per capita and population. Bilateral trade data, however, show that trade grows strongly with income per capita and is largely unresponsi ..."
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Cited by 61 (1 self)
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The standard gravity model predicts that trade flows increase in proportion to importer and exporter total income, regardless of how income is divided into income per capita and population. Bilateral trade data, however, show that trade grows strongly with income per capita and is largely unresponsive to population. I develop a general equilibrium, Ricardian model of trade that allows the elasticity of trade with respect to income per capita and with respect to population to diverge. Goods fall into various types, which differ in their income elasticity of demand and their extent of heterogeneity in production technologies. I estimate the model using bilateral trade data of 162 countries and compare it to a special case that delivers the gravity equation. The general model improves the restricted model’s predictions regarding variations in trade due to size and income. I experiment with counterfactuals. A positive technology shock in China makes poor and rich countries better off, and middle income countries worse off.
Building relationships early: Banks in venture capital. Review of Financial Studies, forthcoming
, 2008
"... The importance of the investor’s organizational structure is increasingly recognized in modern finance. This paper examines the role of banks in the US venture capital market. Theory suggests that unlike independent venture capital firms, banks can seek complementarities between their venture capita ..."
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Cited by 59 (3 self)
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The importance of the investor’s organizational structure is increasingly recognized in modern finance. This paper examines the role of banks in the US venture capital market. Theory suggests that unlike independent venture capital firms, banks can seek complementarities between their venture capital and lending activities. We find no evidence that banks transfer origination or screening skills from their lending to their venture capital activities. However, our analysis suggests that banks use venture capital relationships to bolster their lending activities. Banks target their venture investments to companies that are more likely to subsequently raise loans. Having made an investment as a venture capitalist increases a bank’s likelihood of providing a loan. Companies may benefit from these relationships through more favorable loan pricing. The analysis suggests that banks are strategic investors in the venture capital market, and provides a cautionary note for relying on banks for the development of a venture capital industry. 1
High frequency trading and price discovery, Working paper
, 2013
"... We examine the role of highfrequency traders (HFT) in price discovery. Overall HFT play a positive role in price efficiency by trading in the direction of permanent price changes and in the opposite direction of transitory pricing errors on average days and the highest volatility days. This is done ..."
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Cited by 51 (4 self)
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We examine the role of highfrequency traders (HFT) in price discovery. Overall HFT play a positive role in price efficiency by trading in the direction of permanent price changes and in the opposite direction of transitory pricing errors on average days and the highest volatility days. This is done through their marketable orders. In contrast, HFT passive nonmarketable orders are adversely selected in terms of the permanent and transitory components as these trades are in the direction opposite to permanent price changes and in the same direction as transitory pricing errors. HFT marketable orders’ informational advantage is sufficient to overcome the bidask spread and trading fees to generate positive trading revenues. Nonmarketable limit orders also result in positive revenues as the costs associated with adverse selection are smaller than the bidask spread and liquidity rebates. HFT predicts price changes in the overall market over short horizons measured in the tens of seconds.
Extreme Governance: An Analysis of DualClass Firms in the United States
, 2007
"... We construct and analyze a comprehensive list of dualclass firms in the United States and use this list to investigate the relationship between insider ownership and firm value. Our data has two useful features for this valuation analysis. First, since dualclass stock separates cashflow rights fr ..."
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Cited by 44 (0 self)
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We construct and analyze a comprehensive list of dualclass firms in the United States and use this list to investigate the relationship between insider ownership and firm value. Our data has two useful features for this valuation analysis. First, since dualclass stock separates cashflow rights from voting rights, we can separately identify the impact of each. Second, we address endogeneity concerns by using exogeneous predictors of dualclass status as instruments. While other data sets have provided one of these features, our data set is the first to provide both. We find robust evidence that firm value is increasing In recent years, researchers have demonstrated the powerful role of shareholder rights. The stream of research on this topic finds that the strength of shareholder rights at a company is associated with stock returns, valuations, operating performance, the
The Impact of Government Spending Shocks: Evidence on the Multiplier from State Pension Plan Returns
"... The effect of government spending on income and employment is a central unresolved question in macroeconomics. This paper employs a novel identification strategy to isolate exogenous and unexpected variation in state government spending. State governments manage large definedbenefit pension plans f ..."
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Cited by 41 (1 self)
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The effect of government spending on income and employment is a central unresolved question in macroeconomics. This paper employs a novel identification strategy to isolate exogenous and unexpected variation in state government spending. State governments manage large definedbenefit pension plans for which they bear the investment risk. Using a newlycollected dataset on the returns and portfolios of these plans, I show that the idiosyncratic component of their returns is a strong predictor of subsequent state government spending. Instrumenting with this ‘windfall ’ component of returns, I find that state government spending has a large positive effect on income and employment. Baseline estimates indicate that each dollar of spending raises instate income by 2.12, and that 35,000 of spending generates one additional job. These effects are not due to instate investment bias, are concentrated in the nontraded sector, and are larger during times of labor force ‘slack. ’ Finally, I consider how these results compare with the predictions of a standard macroeconomic model and outline which features in the model are consistent with the empirical findings. ∗I gratefully acknowledge the patient guidance of my adviser Emmanuel Farhi, and my committee members Raj Chetty, Matthew Weinzierl, David Laibson and Robert Barro. I have benefited tremendously from their advice. I also want to thank Erik
t−statistic based correlation and heterogeneity Robust Inference
, 2008
"... We develop a general approach to robust inference about a scalar parameter when the data is potentially heterogeneous and correlated in a largely unknown way. The key ingredient is the following result of Bakirov and Székely (2005) concerning the small sample properties of the standard t−test: For a ..."
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Cited by 31 (1 self)
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We develop a general approach to robust inference about a scalar parameter when the data is potentially heterogeneous and correlated in a largely unknown way. The key ingredient is the following result of Bakirov and Székely (2005) concerning the small sample properties of the standard t−test: For a significance level of 5 % or lower, the t−test remains conservative for underlying observations that are independent and Gaussian with heterogenous variances. One might thus conduct robust large sample inference as follows: partition the data into q ≥ 2 groups, estimate the model for each group and conduct a standard t−test with the resulting q parameter estimators. This results in valid and in some sense efficient inference when the groups are chosen in a way that ensures the parameter estimators to be asymptotically independent, unbiased and Gaussian of possibly different variances. We provide examples of how to apply this approach to time series, panel, clustered and spatially correlated data.
Robust Inference with Clustered Data
, 2010
"... In this paper we survey methods to control for regression model error that is correlated within groups or clusters, but is uncorrelated across groups or clusters. Then failure to control for the clustering can lead to understatement of standard errors and overstatement of statistical significance, a ..."
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Cited by 20 (2 self)
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In this paper we survey methods to control for regression model error that is correlated within groups or clusters, but is uncorrelated across groups or clusters. Then failure to control for the clustering can lead to understatement of standard errors and overstatement of statistical significance, as emphasized most notably in empirical studies by Moulton (1990) and Bertrand, Duflo and Mullainathan (2004). We emphasize OLS estimation with statistical inference based on minimal assumptions regarding the error correlation process. Complications we consider include clusterspecific fixed effects, few clusters, multiway clustering, more efficient feasible GLS estimation, and adaptation to nonlinear and instrumental variables estimators.