We investigate the role of geopolitical risk in the cross-sectional pricng of equities. We estimate the exposure of assets to the geopolitical risk and show that the highest geopolitical risk beta portfolio can generate 3.99\% more annual excess return than the lowest one, which cannot be explained by the three-factor and five-factor models. We separate the geopolitical risk into geopolitical threats and acts and find that threat is the main driver of geopolitical risk premium. Furthermore, geopolitical risk premium is related to investor sentiment and cannot be explained or subsumed by other economic factors (i.e., economic policy uncertainty). These findings suggest that geopolitical risk is an economically important risk factor.
I build a tractable dynamic stochastic general equilibrium model embedded with endogenous entry. In this economy, successful implementation of heterogeneous production innovations by entrepreneurs contributes to economic growth. Facing barrier to entry, entrepreneurs with products of sufficiently high productivity successfully enter the market. The volatility in the endogenous selection of entrants gives rise to an increase in long-run uncertainty of growth prospects. With recursive preference, the household requires a high risk premium to compensate the long-run risk. The calibrated endogenous entry model can produce an equity premium of 4.08%, and a low and stable risk-free rate of 0.60%. If I introduce another exogenous shock -- entry shock that fluctuates the barrier to entry, I find an even higher level of equity premium. Moreover, when the entry shock is pro-cyclical, it amplifies the effect of endogenous entry on long-run risk and enhances equity premium. In particular, if the correlation between entry shock and aggregate shock is 0.4, the calibrated equity premium is 5.72%. When I extend the baseline model to incorporate fiscal policy and pro-cyclical industrial policy, the extended model quantitatively replicates key features of equity premium and risk-free rate.
Truncation-by-death refers to a situation in clinical trials where mortality happens before the primary outcomes are collected, leaving the primary outcomes undefined. By principal stratification, a meaningful causal estimand termed the survivor average causal effect is defined in a subpopulation who will always survive regardless of being treated or controlled. We consider estimation and inference of this estimand using the sure outcomes of random events model. The sure outcomes of random events model visually exhibits core identification assumptions by introducing some latent variables, with explicit connection between latent variables and principal strata. Causal pathways from the treatment to outcome are established via observed variables and latent variables. The survival and outcome are considered to be consequences of a natural cause and a treatment-induced cause. Since survival is measured before the outcome, we allow the natural cause of survival to modify the natural cause of outcome. We also consider interventionist estimands by manipulating the causes. The proposed method is applied to investigate the effect of transplantation type on leukemia relapse undergoing allogeneic stem cell transplantation.
We explore a broad range of high-frequency liquidity measures for the Chinese stock market based on a comprehensive tick-level dataset consisting of approximately 16.7 billion events. We summarize their liquidity levels and key distributional, time-series, and cross-sectional patterns. Order interarrival times follow Weibull---not exponential---distributions, implying that Poisson flow is not an appropriate model for order flow. We find novel intraday periodicities in liquidity at 1-minute, 5-minute, and 10-minute frequencies. We propose the aggressive-passive imbalance (API) and develop a model for the change in bid-ask spread that sheds light on the universal mechanism of spread formation with respect to order flows.
Impact investing typically involves ranking and selecting assets based on a non-financial impact factor, such as the environmental, social, and governance (ESG) score, the amount of carbon emissions, and the prospect of developing a disease-curing drug. We develop a framework for constructing optimal impact portfolios and quantifying their financial performance. Under general bivariate distributions of the impact factor and residual returns in excess of other factors, we demonstrate that the construction and performance of optimal impact portfolios depend only on two quantities: the dependence structure (copula) between the impact factor and residual returns, and the marginal distribution of residual returns. When the impact factor and residual returns are jointly normally distributed, the performance of optimal impact portfolios depends on the correlation between the two, and variations in this correlation over time contribute negatively to performance. More generally, we explicitly derive the optimal portfolio weights under two widely-used copulas---the Gaussian copula and the Archimedean copula family. The optimal weights depend on the tail dependence characteristics of the copula. In addition, when the marginal distribution of residual returns is skewed or heavy-tailed, assets with the most extreme impact factors should have lower weights than non-extreme assets due to their high risk. Overall, these results provide a recipe for constructing and quantifying the performance of optimal impact portfolios for any impact factor with arbitrary dependence structures with asset returns.
This paper investigates corporate history as a specific source of firm fixed effects by comparing firms born in one of the NBER recession periods with other firms. We find strong empirical evidence that firms born in recession have stronger operating performance, and perform particular better in the stock market during the recession periods. We also find that a significant extent of the heterogeneity in corporate innovation, investment, financing, organizational, and risk taking policies can be attributed to firm birth years. Our findings suggest that the otherwise unavailable creative destruction opportunities and the adverse founding conditions may have imprinted their marks on firms. These imprinted marks have a long-lasting effect on firms' approach toward decision making, leading to large variation in firm performance.
This paper identifies changes in trade barrier as a pricing factor for domestic firms in importing countries. I first build a dynamic stochastic general equilibrium with international trade. In the model, an exogenous shock that decreases trade barriers of the importing country has a negative effect on the cash flows of domestic companies in that country. The investors of the domestic firms exposed to the sudden reduction in trade barriers require positive risk premia to compensate for the displacement risk. The effect of displacement risk is strongest when the importing industry has high transportation cost, and when the importing industry is more concentrated. Using data of U.S. industry-level import tax to measure changes in trade barriers, I find that (i) industries with more severe tariff reduction have higher average returns; (ii) this effect of tariff changes on stock returns is largest for industries with high freight and insurance costs and industries with high Herfindahl index.
In digital cameras, we find a major limitation: the image and video form inherited from a film camera obstructs it from capturing the rapidly changing photonic world. Here, we present vidar, a bit sequence array where each bit represents whether the accumulation of photons has reached a threshold, to record and reconstruct the scene radiance at any moment. By employing only consumer-level CMOS sensors and integrated circuits, we have developed a vidar camera that is 1,000× faster than conventional cameras. By treating vidar as spike trains in biological vision, we have further developed a spiking neural network-based machine vision system that combines the speed of the machine and the mechanism of biological vision, achieving high-speed object detection and tracking 1,000× faster than human vision. We demonstrate the utility of the vidar camera and the super vision system in an assistant referee and target pointing system. Our study is expected to fundamentally revolutionize the image and video concepts and related industries, including photography, movies, and visual media, and to unseal a new spiking neural network-enabled speed-free machine vision era.
Event cameras as bioinspired vision sensors have shown great advantages in high dynamic range and high temporal resolution in vision tasks. Asynchronous spikes from event cameras can be depicted using the marked spatiotemporal point processes (MSTPPs). However, how to measure the distance between asynchronous spikes in the MSTPPs still remains an open issue. To address this problem, we propose a general asynchronous spatiotemporal spike metric considering both spatiotemporal structural properties and polarity attributes for event cameras. Technically, the conditional probability density function is first introduced to describe the spatiotemporal distribution and polarity prior in the MSTPPs. Besides, a spatiotemporal Gaussian kernel is defined to capture the spatiotemporal structure, which transforms discrete spikes into the continuous function in a reproducing kernel Hilbert space (RKHS). Finally, the distance between asynchronous spikes can be quantified by the inner product in the RKHS. The experimental results demonstrate that the proposed approach outperforms the state-of-the-art methods and achieves significant improvement in computational efficiency. Especially, it is able to better depict the changes involving spatiotemporal structural properties and polarity attributes.
After the Kigali Amendment (KA) came into effect, HCFC-22 plants are obliged to limit HFC-23 emissions. Therefore, the study of cost-effective mitigation pathways for HFC-23 is important for the sustainable implementation of KA in China and other HCFC-22 producing countries. This study constructed an inventory of HFC-23 by-production, emissions, and abatement for HCFC-22 plants in China from 2006 to 2020, and predicted the costs and climate benefits of HFC-23 abatement in China's compliance with the KA between 2021 and 2060. Results showed that HFC-23 emissions from HCFC-22 plants in China contributed about 60% of the growth in global atmospheric mole fraction of HFC-23 observed by Advanced Global Atmospheric Gases Experiment (AGAGE) from 2007 to 2020. Furthermore, China's cumulative HFC-23 abatement was about 109 kt (1613 Mt CO2-eq) from 2006 to 2019, accounting for 53% of total by-production, which allowed the global atmospheric mole fraction and radiative forcing of HFC-23 in 2020 to avoid an uplift of 9.2 × 10−9 and 1.7 mW m−2, respectively, contributing to climate change mitigation. Under the baseline of the Kigali Amendment, less emission (LE), and resource utilization (RU) scenarios, the cumulative HFC-23 abatement from 2021 to 2060 would be 683 ± 29 kt (10107 ± 431 Mt CO2-eq), 694 ± 29 kt (10277 ± 427 Mt CO2-eq), and 702 ± 29 kt (10385 ± 426 Mt CO2-eq), respectively. The cumulative net abatement costs for the KA, LE, and RU scenarios would be 5.0 ± 0.2, 2.9 ± 0.2, and −2.7 ± 0.2 billion CNY (2021 prices), respectively. In the future, applying resource utilization technology to reduce HFC-23 emissions can achieve both climate and economic benefits.