Fall 2021 Seminars

Date Title/Speaker Abstract
09/22

Attention Based Dynamic Graph Learning Framework for Asset Pricing


Ajim Uddin, Ph.D. Candidate, MTSM, NJIT


Xinyuan Tao, MTSM, NJIT
Dantong Yu, MTSM, NJIT
 

Recent studies suggest that financial networks play an essential role in asset valuation and investment decisions. Unlike road networks, financial networks are neither given nor static, posing significant challenges in learning meaningful networks and promoting their applications in price prediction.  In this paper, we first apply the attention mechanism to connect the "dots'' (firms) and learn dynamic network structures among stocks over time.   Next, the end-to-end graph neural networks pipeline diffuses and propagates the firms' accounting fundamentals into the learned networks and ultimately predicts stock future returns. The proposed model reduces the prediction errors by 6% compared to the state-of-the-art models. Our results are robust with different assessment measures.  We also show that portfolios based on our model outperform the S&P-500 index by 34% in terms of Sharpe Ratio, suggesting that our model is better at capturing the dynamic inter-connection among firms and identifying stocks with fast recovery from major events. Further investigation on the learned networks reveals that the network structure aligns closely with the market conditions. Finally, with an ablation study, we investigate different alternative versions of our model and the contribution of each component.
10/13

Entry by employee spinouts across industry boundaries

Pamela Adams, Associate Professor of Management, Seton Hall University

Our research focuses on new firms and their role in the formation of links between vertically related industries.  More specifically, we focus on one form of organizational structure, employee spinouts, and examine how the formation of such spinouts might affect knowledge transfer across vertically related industries. The extant literature has generally defined spinouts as entrepreneurial ventures founded by the ex-employees of existing firms in an industry. These new firms stay in the same the same industry from which they originate.  But recent studies find that spinouts may also cross industry boundaries to enter into a vertically related industry to form what we call vertical spinouts.  With respect to a focal industry, spinouts that originate from downstream industries are referred to as user-industry spinouts, while those that originate from upstream industries are referred to as supplier-industry spinouts.  This research also suggests that such vertical spinouts constitute a consistent part of new entrants in vertically related industries (Adams et al., 2016; Agarwal and Shah, 2014). 

To understand the relevance of vertical spinouts across related industries, we examine their performance both in terms of number and in terms of survival over time with respect to other de novo entrants in an industry. We propose that vertical spinouts have informational advantages compared to other de novo entrants due to the technological, marketing and industry knowledge they inherit through their founders from their previous employment in either a user- or a supplier-industry.
10/27

Paradox of Dual Class Shares in IPOs: Antecedents and Consequences

Mazhar Islam, Assistant Professor of Management, Loyola University

Firms are increasingly using dual-class shareholding structures at the time of initial public offerings (IPOs). In a dual-class shareholding structure, one class of shareholders are given lower or no voting rights (Class A) while the other class of shareholders (Class B) preserve substantial voting rights. In general, founders and managers control Class B shares. Previous research provides two opposing views. One stream of research suggests that when managers control more voting rights, they create higher firm value by investing in long-term projects because they can insulate the firm from short-term investors and capital market pressures. In contrast, the other stream of research suggests that managers with more voting rights can gain higher private benefits by engaging in shareholder value-destroying activities. Our research seeks to uncover this apparent paradox by investigating both antecedents and consequences of dual-class shareholding structures at the time of IPO. In particular, we focus on how the propensity of offering dual-class shares is related to whether the IPO firms received VC-funding and whether the CEOs of these firms were founder-CEOs. In addition, we focus on the performance implications of dual-class shareholding structures. We investigate these relationships using all the IPO firms the U.S. stock exchanges between 2001 and 2017. We discuss the implications of the study for IPO firms and the policymakers.


 
11/17 Roshani Bharati, Ph.D Candidate, MTSM, NJIT