Publications

Educators

2007
Working Paper

Irving Fisher, Economic Forecasting, and the Myth of the Business Cycle

By: Walter A. Friedman

A premier economist of the twentieth century and a founder of neoclassical thought, Irving Fisher was also an active participant in the field of economic forecasting. Fisher made theoretical contributions to the understanding of economic fluctuations, popularized the... View Details

Keywords: Forecasting and Prediction; Economics; Business Cycles; Business History; Newspapers; Personal Development and Career

May 2006
Case

Nokia in 2003

By: Paul M. Healy

Examines the challenges facing a money manager who owns stock in Nokia, the leading wireless handset provider. Two analysts covering the stock make very different predictions about the economies of the industry, Nokia's future performance, and stock recommendations.... View Details

Keywords: Financial Reporting; Forecasting and Prediction; Performance Effectiveness; Performance Evaluation; Problems and Challenges; Electronics Industry

Educators

25 Apr 2007
Research & Ideas

Feeling Stuck? Getting Past Impasse

the crisis. We realize that our old ways are not working. It's not a matter of staying up late, working harder, and getting in earlier. Emotionally there's the feeling of being stuck. And then some predictable things happen in the second... View Details

Keywords: by Martha Lagace

Article

Ensembles of Overfit and Overconfident Forecasts

By: Y. Grushka-Cockayne, V.R.R. Jose and K. C. Lichtendahl

Firms today average forecasts collected from multiple experts and models. Because of cognitive biases, strategic incentives, or the structure of machine-learning algorithms, these forecasts are often overfit to sample data and are overconfident. Little is known about... View Details

Keywords: Decision Analysis; Data Science; Forecasting and Prediction; Data and Data Sets

October 2010
Article

Culture Clash: The Costs and Benefits of Homogeneity

By: Eric Van den Steen

This paper develops an economic theory of the costs and benefits of corporate culture-in the sense of shared beliefs and values in order to study the effects of "culture clash" in mergers and acquisitions. I first use a simple analytical framework to show that shared... View Details

Keywords: Cost vs Benefits; Organizational Culture; Economics; Information Management; Forecasting and Prediction; Values and Beliefs; Mergers and Acquisitions; Framework; Satisfaction; Motivation and Incentives; Power and Influence; Communication

August 2003
Article

When Does the Market Matter? Stock Prices and the Investment of Equity-Dependent Firms

By: Malcolm Baker, Jeremy Stein and Jeffrey Wurgler

We use a simple model of corporate investment to determine when investment will be sensitive to non-fundamental movements in stock prices. The key cross-sectional prediction of the model is that stock prices will have a stronger impact on the investment of firms that... View Details

Keywords: Stocks; Price; Investment; Equity; Forecasting and Prediction; Rank and Position; Markets

Article

Beacon and Warning: Sherman Kent, Scientific Hubris, and the CIA's Office of National Estimates

By: J. Peter Scoblic

Would-be forecasters have increasingly extolled the predictive potential of Big Data and artificial intelligence. This essay reviews the career of Sherman Kent, the Yale historian who directed the CIA’s Office of National Estimates from 1952 to 1967, with an eye toward... View Details

Keywords: National Security; Analytics and Data Science; Analysis; Forecasting and Prediction; History

Article

Why Do Pro Forma and Street Earnings Not Reflect Changes in GAAP? Evidence from SFAS 123R

By: Ian D. Gow, Mary E. Barth and Daniel Taylor

This study examines how key market participants—managers and analysts—responded to SFAS 123R's controversial requirement that firms recognize stock-based compensation expense. Despite mandated recognition of the expense, some firms' managers exclude it from pro forma... View Details

Keywords: Motivation and Incentives; Employee Stock Ownership Plan

July 1986 (Revised August 1987)
Background Note

Note on Comparative Advantage

By: David B. Yoffie and John J. Coleman

Discusses David Ricardo's theory of comparative advantage and the refinement of his model developed by Eli Heckscher and Bertil Ohlin. Presents several criticisms of the Heckscher-Ohlin theory, including Wassily Leontief's empirical demonstration that the nature of... View Details

Keywords: Business Model; Forecasting and Prediction; Macroeconomics; Trade; Theory

Educators

2008
Working Paper

Catering through Nominal Share Prices

By: Malcolm Baker, Robin Greenwood and Jeffrey Wurgler

We propose and test a catering theory of nominal stock prices. The theory predicts that when investors place higher valuation on low-price firms, managers will maintain share prices at lower levels, and vice-versa. Using measures of time-varying catering... View Details

Keywords: Stocks; Stock Shares; Investment; Investment Return; Price; Theory; Valuation

Article

Soul and Machine (Learning)

By: Davide Proserpio, John R. Hauser, Xiao Liu, Tomomichi Amano, Burnap Alex, Tong Guo, Dokyun (DK) Lee, Randall Lewis, Kanishka Misra, Eric Schwarz, Artem Timoshenko, Lilei Xu and Hema Yoganarasimhan

Machine learning is bringing us self-driving cars, medical diagnoses, and language translation, but how can machine learning help marketers improve marketing decisions? Machine learning models predict extremely well, are scalable to “big data,” and are a natural fit to... View Details

Keywords: Machine Learning; Marketing Applications; Knowledge; Technological Innovation; Core Relationships; Marketing; Applications and Software

Article

The Cross Section of Expected Holding Period Returns and Their Dynamics: A Present Value Approach

By: Matthew R. Lyle and Charles C.Y. Wang

We provide a tractable model of firm-level expected holding period returns using two firm fundamentals—book-to-market ratio and ROE—and study the cross-sectional properties of the model-implied expected returns. We find that 1) firm-level expected returns and expected... View Details

Keywords: Expected Returns; Discount Rates; Holding Period Returns; Fundamental Valuation; Present Value; Valuation; Investment Return

13 Apr 2017
News

Three men + software = l'Elysée?

Research Summary

The Role of Financial and Information Intermediaries in the Capital Markets

Hutton's research investigates the role of financial analysts and short sellers in the pricing of equity securities. Recently, Hutton examines (with Patricia Dechow and Richard Sloan) the role of sell-side analysts' earnings forecasts in the pricing of common equity... View Details

08 Sep 2014
News

The Original Disruptor, Clayton Christensen, And VC Bill Hambrecht Talk About The Theory Of Disruption

Siyu Zhang

Siyu Zhang is a second-year doctoral student at HBS. Zhang joined Harvard Business School in 2020 as a Research Associate and has been working on macroeconomic forecasting projects. Prior to joining HBS, he was a Data Scientist at John Hancock, where he utilized... View Details

December 2012
Article

Evidence on the Use of Unverifiable Estimates in Required Goodwill Impairment

By: Karthik Ramanna and Ross L. Watts

SFAS 142 requires managers to estimate the current fair value of goodwill to determine goodwill write-offs. In promulgating the standard, the FASB predicted managers will, on average, use the fair value estimates to convey private information on future cash flows. The... View Details

Keywords: Goodwill Impairment; Fair-value Accounting; FASB; SFAS 142; Fair Value Accounting; Standards; Cash Flow; Agency Theory; Motivation and Incentives; Forecasting and Prediction; Goodwill Accounting

SSRN

Research Summary

Implications of Limits of Arbitrage (with James Choi)

In this project we investigate the relationship between limits to arbitrage facing mutual fund managers and asset pricing anomalies. We measure changes in the limits to arbitrage by computing the average of slopes on current and past returns in quarterly... View Details

August–September 2012
Article

The Future of Boards: Meeting the Governance Challenges of the 21st Century

By: Jay W. Lorsch

Predicting the challenges boards will face in the years ahead requires an understanding of how they and the governance they have provided has evolved in past years, as well as the challenges they face in the years ahead. Since I have been serving on and doing research... View Details

Keywords: Boards Of Directors; Corporate Governance; Governance; Succession; Compensation; Governing and Advisory Boards