Lorem Ipsum

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Donec vel libero at lectus rutrum vestibulum vitae ut turpis. Ut ultricies pulvinar posuere. Nulla rutrum, libero nec pharetra accumsan, enim leo blandit dui, ac bibendum augue dui sed justo. Interdum et malesuada fames ac ante ipsum primis in faucibus. Duis sit amet fringilla mauris. Ut pharetra, leo id venenatis cursus, libero sapien venenatis nisi, vel commodo lacus urna non nulla. Duis rutrum vestibulum ligula sed hendrerit. Ut tristique cursus odio, et vulputate orci fringilla nec. Proin tempus ipsum ut augue consectetur, in varius dolor bibendum. Proin at dapibus nisl.

Aliquam purus lectus, sodales et est vitae, ullamcorper scelerisque urna. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nulla feugiat, nunc nec gravida varius, nisl tellus dictum purus, a tristique purus lectus eget orci. Vivamus faucibus diam erat, vitae venenatis neque convallis vitae. Etiam eget iaculis arcu. Duis id nisl sapien. Aliquam erat volutpat. Interdum et malesuada fames ac ante ipsum primis in faucibus. Quisque luctus lorem a odio congue auctor. Suspendisse potenti. Nunc convallis, ante sit amet lobortis eleifend, orci dolor lacinia diam, quis luctus ante magna non sem. Phasellus pretium aliquam enim, a suscipit elit sodales vel. Proin tincidunt quis

Online Network Revenue Management Using Thompson Sampling

19 b

We consider a network revenue management problem where an online retailer aims to maximize revenue from multiple products with limited inventory. As common in practice, the retailer does not know the expected demand at each price and must learn the demand information from sales data. We propose an efficient and effective dynamic pricing algorithm, which builds upon the Thompson sampling algorithm used for multi-armed bandit problems by incorporating inventory constraints into the pricing decisions. Our algorithm proves to have both strong theoretical performance guarantees as well as promising numerical performance results when compared to other algorithms developed for the same setting. More broadly, our paper contributes to the literature on the multi-armed bandit problem with resource constraints, since our algorithm applies directly to this setting when the inventory constraints are interpreted as general resource constraints.

The Globalization of Angel Investments Evidence across Countries

8 b

Executive Summary — Examining a cross-section of 13 angel groups who considered transactions across 21 countries, this study finds that angel investors have a positive impact on the growth of the firms they fund, their performance, and survival, while the selection of firms that apply for angel funding varies across countries.

Author Abstract

This paper examines investments made by 13 angel groups across 21 countries. We compare applicants just above and below the funding cutoff and find that these angel investors have a positive impact on the growth, performance, and survival of firms as well as their follow-on fundraising. The positive impact of angel financing is independent of the level of venture activity and entrepreneur friendliness in the country. But we find that the development stage and maturity of startups that apply for angel funding (and those that are ultimately funded) is inversely correlated with the entrepreneurship friendliness of the country, which may reflect self-censoring by very early stage firms that do not expect to receive funding in these environments.

Extrapolation and Bubbles

1 b

Executive Summary — Bubble episodes have fascinated economists and historians for centuries, in part because human behavior in bubbles is so hard to explain, and in part because of the devastating side effects of the crash. At the heart of the standard historical narratives of bubbles is the concept of extrapolation—the formation of expected returns by investors based on past returns. This paper presents a simple model of extrapolative bubbles that explains a lot of evidence and makes new predictions.

Author Abstract

We present an extrapolative model of bubbles. In the model, many investors form their demand for a risky asset by weighing two signals: an average of the asset’s past price changes and the asset’s degree of overvaluation. The two signals are in conflict, and investors “waver” over time in the relative weight they put on them. The model predicts that good news about fundamentals can trigger large price bubbles. We analyze the patterns of cash-flow news that generate the largest bubbles, the reasons why bubbles collapse, and the frequency with which they occur. The model also predicts that bubbles will be accompanied by

9 Small Business Ideas for the Entrepreneur for 2016

Is your dream to be an entrepreneur? Believe it or not, it may not be as difficult as you think. With hard work and a phenomenal idea, owning your own business can shift from a goal to a reality. Trying to come up with a business idea that is both outstanding and practical is not an easy task, however. To help you get started on the path to success, consider the following small business ideas:

  1. Career Coaching – Do you love to encourage and inspire others to be their best? Starting a career coaching practice allows you to help people decide what they want to do for a living, while also making a difference in their life. This includes prepping your clients for interviews, helping them discover their passions, improving their resumes and instructing them on how to land their dream job.
  1. Computer Maintenance – There’s probably nothing more frustrating for a business or individual than having computer problems. If your background is tech, the opportunities are limitless. From businesses to every member of today’s family owning tablets, smartphones and laptops, there will always be maintenance needs. Other private computer services include: printer hookups,

Advantages Of Trading CFDs


CFDs are increasingly becoming popular because they offer significant benefits compared to traditional investment methods. With Contracts For Differences you are able to reap all economic benefits of share dealing without necessarily owning the shares physically. Here are the Advantages of Trading CFDs:

High Levels of Leverage

Trading Contracts For Differences involves leverage. This means that as a trader, you are expected to pay part of the total value this trade has to be able to open a position. This is exactly what margin is, and normally a given percentage of the full trade value needed up front. As trader leverage may assist you magnify any profit that you realize, however the opposite is true. It’s therefore extremely important that as a trader you get to understand the risks that leverage and margins entail just before taking advantage of these. You need to seek an independent advice if this isn’t the case.

Variety of Trading Options

There are index, stock, treasury, commodity and currency CFDs; even sector Contracts For Differences too have emerged. Thus it’s not only the stock traders that benefit- traders of several different financial vehicles too can look CFDs

What Companies Should Not Do in the Next Banking Crisis

When banks failed across the globe in 2008, the resulting financial crisis sent businesses into a tailspin. As lenders cut back dramatically, companies trying to recover had to scramble for financing required to generate new business and for capital expenditures. Businesses were also faced with difficult decisions over what investments to keep and what investments to cut.

How they made those choices and what effect they had on business and national recovery in the long run hasn’t been well understood, however.

Harvard Business School Assistant Professor Claudia Steinwender tackles that question in a new paper, titled Survive Another Day: Using Changes in the Composition of Investments to Measure the Cost of Credit Constraints (forthcoming in the Review of Economics and Statistics).

“Firms rely on banks a lot in order to make investments for the future,” says Steinwender, who joined the HBS faculty this fall after earning her doctorate from the London School of Economics. “If that credit stops, it can have a huge effect. We wanted to understand how firms deal with that, and what firms might not do that they otherwise would have done.”

“As we looked at that data, we realized there

How to Predict if a New Business Idea is Any Good

entrepreneur Brian Chesky and his two San Francisco roommates made the rounds of Silicon Valley VC firms with what they thought was a great idea: a website and mobile app that would allow homeowners to open their homes to strangers to sleep on their floor while traveling, in exchange for a nightly fee.

Of course, now we know the idea as Airbnb, a $10 billion business with 1.5 million listings around the world. But back then it must have seemed crazy. The liability issues alone seemed insurmountable—to say nothing of the likelihood that people would be willing to give the keys of their houses to total strangers who may or may not be serial killers.

Five VC firms rejected the nascent company’s pitch outright, and another two didn’t even bother to reply. “Investors must have thought, who would ever do this?” says Assistant Professor Pian Shu, a member of the Technology and Operations Management unit at Harvard Business School. “They didn’t know it would turn out to be a multibillion dollar industry.”

“By definition, when an investor makes an investment, it changes the probability of success”

In a new working paper, Shu asks the

A Normative Theory of Dynamic Capabilities Connecting Strategy

The field of strategy has mounted an enormous effort to understand, define, predict, and measure how organizational capabilities shape competitive advantage. While the notion that capabilities influence strategy dates back to the work of Andrews (1971), attempts to formalize a “capabilities based” approach to strategy only began to take shape in the past 20 years. In particular, the publication of Teece and Pisano’s (1994) and Teece, Pisano, and Shuen’s (1997) work on “dynamic capabilities” triggered a flood of debate and discussion on the topic. Because strategy is a normative field, its theories must be evaluated in terms of how well they inform and impact practice. Judging by this standard, the dynamic research capabilities research program has come up short. It has become mired in endless debates about definitions and has engaged obsessively in an elusive search for properties that make organizations adaptable. In this paper, I argue that the research program on dynamic capabilities needs to be reset around the fundamental strategic problem facing firms: how to identify and select capabilities that lead to competitive advantage. I frame the firm’s capability strategy problem as one of choosing among different types of capability enhancing investments, ranging from general-purpose know-how

How Activist Investors Became Respectable

Once reviled as villains operating on the fringes of the market, activist investors like Carl Icahn are now powerful forces at work in the mainstream of business, says Professor Joseph Fuller. And their influence is only growing.

(Editor’s Note. Carl Icahn is in the news again. On Monday, SEC filings revealed the militant investor has sold his entire stake in eBay, after successfully pushing the company to spin off its PayPal operation. Harvard Business School professor Joseph Fuller looks at the rise in respectability and influence that activist investors such as Icahn are gaining on Wall Street.)

Carl Icahn made news last month when he announced he had accumulated a large ownership stake in American International Group (AIG) and said he wanted the company split up. His letter making the case to management was posted online well before any regulatory filing disclosed his holdings in the company.

These tactics may have been designed for drama, but the investment strategy and its scale are nothing unusual today. Activist shareholders and the hedge funds they run are thinking and acting bigger than ever. They continue to raise huge new sums of money to invest, targeting some of the world’s

State Police Powers Federal Antitrust and the Politics

Executive Summary — In a study of California retail druggists at the turn of the twentieth century, Laura Phillips Sawyer, finds that price-fixing counterintiutively increased competition.

Author Abstract

Prior to the Great Depression and President Franklin Roosevelt’s New Deal programs, considerable pressure for antitrust revision came from trade associations of independent proprietors. A perhaps unlikely leader, Edna Gleason, organized California’s retail pharmacists and coordinated trade networks to monitor and enforce Resale Price Maintenance (RPM) contracts, a system of price-fixing, then known as “fair trade.” Progressive jurists, including Louis Brandeis, and institutional economist E.R.A. Seligman supported RPM as a legitimate tactic to protect small businesspeople and enhance non-price competition. The breakdown of legal and economic consensus regarding what constituted “unfair competition” allowed businesspeople to act as intermediaries between heterodox economic thought and contested antitrust law, ultimately tailoring federal policy to accommodate state regulations.

Self Control and Commitment Can Decreasing the Liquidity of a Savings Account Increase Deposits

If individuals have self-control problems that lead them to spend money when they had previously planned to save it, they may take up financial commitment devices that restrict their future ability to access their funds. We experimentally investigate how the demand for commitment contracts is affected by contract design features. In our experiments, each subject is endowed with a sum of money and asked to divide that money between a liquid account, which permits unrestricted withdrawals at any time over the course of the months-long experiment, and one or more commitment accounts, which impose withdrawal penalties or restrictions. The design features of the liquid account are the same for all subjects, but the design features of the commitment account(s) are randomized across subjects. When the interest rates on the two types of accounts are the same, we find that allocations to a commitment account are higher when the account is less liquid. The commitment account that disallows early withdrawals altogether attracts the largest allocations. However, this relationship no longer holds when the commitment account interest rate is greater than the liquid account interest rate.

The Rise of Personalized Entrepreneurial Finance and Other VC Trends

Over the last ten years, technology has reduced entire catalogues of consumer goods to devices that fit in the palms of our hands. Phones are smarter, networks are faster, and more people have access to more information than ever before.

This democratization of access has affected different industries in different ways. Venture capital, for example, was once mostly reserved for institutional investors backed by endowments and pension funds. Today, it increasingly includes individual investors who are using technological tools and data to steer capital directly into businesses they care about and believe in.

Consider that one of those tools, crowdfunding, is on track to account for more investment money than venture capital itself by 2016, rising from just $880 million in 2010 to an estimated $34 billion by 2015.

To understand the current investment and entrepreneurial landscape, and what venture capital might look like in the future, we asked Josh Lerner, the Jacob H. Schiff Professor of Investment Banking and head of the Entrepreneurial Management unit at Harvard Business School, what trends he’s paying close attention to in the coming year.

Christian Camerota: What areas of entrepreneurship and venture capital are especially exciting right now?

Josh Lerner: One of the big changes in venture capital

How Do You Predict Demand and Set

How can a retailer use its own data to determine what to charge for its products on a day-to-day basis? Kris Ferreira explains the value of data-driven-pricing

How can a retailer use its own data to determine what to charge for products it has never sold before?

That’s a question Kris Ferreira considered during a presentation at Future Assembly, an event at Harvard Business School where business leaders and academics discussed the challenges of operating in a digitally-transformed economy.

“All of these decisions would be easy to make if I knew what consumer demand will be. The problem is that I have a lot of uncertainty in demand”

All retailers face tricky tactical decisions related to assortment, inventory, product placement, and pricing. “All of these decisions would be easy to make if I knew what consumer demand will be,” Ferreira said. “The problem is that I have a lot of uncertainty in demand.”

Ferreira believes that the trick to tactical decision-making lies in quantitative analysis.

She explained that the world of business analytics includes descriptive analytics (analyzing what has happened), predictive analytics (analyzing data to figure out what will probably happen), and

When Hosts Attack The Competitive Threat of Online Platforms

Online retail platforms like Amazon are great for the third-party businesses that use them—until the platform’s owner decides to start competing with them. Feng Zhu looks at the factors that turn hosts into predators.

In the online marketplace, oodles of retailers and developers rely on “platforms” such as Amazon.com, the Apple App Store, Facebook, and Twitter to get their products and services into the hands of users. Retailers, for example, sell items on Amazon to extend their reach to more potential buyers; application developers turn to the App Store for digital distribution. The platform providers are their selling partners, scraping off a little bit for themselves on each sale.

It’s a great arrangement for small businesses—until their hosts decide to start competing with them.

“Millions of businesses are building their services around these platforms,” said Harvard Business School assistant professor Feng Zhu, during a presentation at Future Assembly, an event at Harvard Business School where business leaders and academics discussed the challenges of operating in a digitally-transformed economy. “A platform owner may imitate them and enter their markets by offering similar products,” Zhu explained.

“Before you build your business model around platforms, you need

Are the Best and Brightest Going into Finance Skill Development and Career Choice of MIT Graduates

Executive Summary — Pian Shu finds that MIT students who self-select into finance are less academically accomplished than those who choose science and technology.

Author Abstract

Using detailed data on recipients of bachelor’s degrees from MIT between 2006 and 2012, I examine the selection of students going into finance or science and engineering (S&E). I find that academic achievement in college is negatively correlated with a propensity to take a job in finance and positively correlated with a propensity to pursue a graduate degree or taking a job in S&E. This pattern is primarily driven by differences in skill development during college, not by differences in academic qualifications at college entry. In both high school and college, the two groups participate in different activities: students who ultimately choose finance are substantially more likely to be varsity-sports leaders in high school; they are also more likely to join fraternities and sororities, a decision typically made at college entry. Sizable differences in academic performance begin in freshman year and persist throughout college. The 2008 financial crisis, which substantially reduced the availability of entry-level positions in finance, prompted some students with relatively low college-entry qualifications to major in S&E

Forward Guidance in the Yield Curve Short Rates versus Bond Supply

central banks have been conducting monetary policy through two primary instruments: quantitative easing (QE), in which they buy long-term government bonds and other long-term securities, and “forward guidance,” in which they guide market expectations about the path of future short rates. This paper analyzes the effects of forward guidance on both short rates and QE. Results show that forward guidance on QE tends to impact longer maturities than forward guidance on short rates, even when expectations about bond purchases by the central bank concern a shorter horizon than expectations about future short rates.

Author Abstract

We present a model of the yield curve in which the central bank can provide market participants with forward guidance on both future short rates and on future Quantitative Easing (QE) operations, which affect bond supply. Forward guidance on short rates works through the expectations hypothesis, while forward guidance on QE works through expected future bond risk premia. If a QE operation is expected to be undone in the near term, then its announcement will have a hump-shaped effect on the yield and forward-rate curves; otherwise the effect may be increasing with maturity. Humps associated to QE announcements typically occur at

Financial Patent Quality Finance Patents After State Street

Executive Summary — Although the past few decades have seen a surge in patents of inventions related to financial services, concerns have been raised about the quality of those patents. New research shows that finance patents in aggregate cite fewer non-patent publications and especially fewer academic publications.

Author Abstract

In the past two decades, patents of inventions related to financial services (“finance patents”), as well as litigation around these patents, have surged. One of the repeated concerns voiced by academics and practitioners alike has been about the quality of these patents, in particular, and business method patents more generally. Because so much of the prior work in these areas has not been patented, concerns have been expressed as to the extent to which the awards reflect this knowledge. Inspired by these issues, this paper empirically examines the quality of finance patents in the years after the landmark litigation between State Street Bank and Signature Financial Group. We show that relative to two sets of comparison groups, finance patents in aggregate cite fewer non-patent publications and especially fewer academic publications. This finding holds across the major assignee groups. In addition, it appears that patents assigned to individuals

Risk Preferences and Misconduct Evidence from Politicians

Executive Summary — Risk-taking is widely understood to be a vital aspect of leadership, yet it may have a dark side. This study of financial risk-taking among politicians shows risk preferences to be an important antecedent of misconduct. Risk preferences as measured by portfolio choices between risky and safe investments were found to strongly predict political scandals. When employing risk-taking leaders, this suggests a potential tradeoff between performance and misconduct.

Author Abstract

When seeking new leaders, business and government organizations alike often need individuals that are less risk averse, or even risk-seeking, in order to improve performance. However, individuals amenable to increased risk-taking may be more likely to engage in misconduct. To study this issue, we explore U.S. political scandals and the implicated politicians’ portfolio choices. We find that a politician allocating all of her portfolio to risky investments has double the odds of being involved in a political sandal compared to a politician allocating all of her portfolio to safe investments. This suggests that those who are more willing to take risks in their personal finances are also more likely to engage in misconduct. We validate portfolio choice as a measure of risk preferences by

Replicating Private Equity with Value Investing Homemade Leverage and Hold to Maturity Accounting

Executive Summary — This paper studies the asset selection of private equity investors and the risk and return properties of passive portfolios with similarly selected investments in publicly traded securities. Results indicate that sophisticated institutional investors appear to significantly overpay for the portfolio management services associated with private equity investments.

Author Abstract

Private equity funds tend to select relatively small firms with low EBITDA multiples. Publicly traded equities with these characteristics have high risk-adjusted returns after controlling for common factors typically associated with value stocks. Hold-to-maturity accounting of portfolio net asset value eliminates the majority of measured risk. A passive portfolio of small, low EBITDA multiple stocks with modest amounts of leverage and hold-to-maturity accounting of net asset value produces an unconditional return distribution that is highly consistent with that of the pre-fee aggregate private equity index. The passive replicating strategy represents an economically large improvement in risk- and liquidity-adjusted returns over direct allocations to private equity funds, which charge average fees of 6% per year

Credit Market Sentiment and the Business Cycle

Using U.S. data from 1929 to 2013, we show that elevated credit-market sentiment in year t – 2 is associated with a decline in economic activity in years t and t + 1. Underlying this result is the existence of predictable mean reversion in credit-market conditions. That is, when our sentiment proxies indicate that credit risk is aggressively priced, this tends to be followed by a subsequent widening of credit spreads, and the timing of this widening is, in turn, closely tied to the onset of a contraction in economic activity. Exploring the mechanism, we find that buoyant credit-market sentiment in year t – 2 also forecasts a change in the composition of external finance: net debt issuance falls in year t, while net equity issuance increases, patterns consistent with the reversal in credit-market conditions leading to an inward shift in credit supply. Unlike much of the current literature on the role of financial frictions in macroeconomics, this paper suggests that time-variation in expected returns to credit-market investors can be an important driver of economic fluctuations.