Tag Archive for Hornstein

Hornstein Authors New Article in ‘China Economic Review’

Abigail Hornstein

Abigail Hornstein

Associate Professor of Economics Abigail Hornstein’s article, “Words vs. actions: International variation in the propensity to fulfill investment pledges in China,” was published in the journal China Economic Review in July 2017.

Hornstein studied whether companies from certain countries were more likely than others to fulfill investment pledges. On average, she found that firms fulfilled about 59 percent of their pledges within two years. This number was lower for firms in countries with greater uncertainty avoidance, power distance, and egalitarianism; and higher for those in countries that are more traditional. She also found that popular attitudes toward China did not affect the likelihood of fulfilling investment pledges.

Wesleyan Team Takes Second Prize in Investment Contest

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A team of Wesleyan students took second place with a 24.28 percent return in the 2017 Adirondack Cup, a stock picking contest for college students interested in the investment field. This is the sixth year that Wesleyan has fielded a team, and represented the best performance to date. The contest offers a unique setting for students to test their investment research skills using businesses not widely covered by analysts and the news media.

Over 160 students from 22 colleges and universities participated in the contest this year, which focuses exclusively on “small cap” public companies, the expertise of the contest’s sponsor, Adirondack Research & Management, Inc. This firm is an advisor to The Adirondack Small Cap Fund (ADKSX), an SEC registered no-loan mutual fund established in 2005. A team from Union College took first place. See the final results here.

Wesleyan’s team members included Eddie McCann ’19, Nikolas Ortega ’19, Daniil Plokhikh ’19, Attul Jakkampudi ’20, Sonja English ’20, Mitchell Motlagh ’20, Sahil Shah ’19, Kofi Ofori-Darko ’20, Dan Tran ’20, Allesandro Lorenzoni ’20 and Daniel Lombardo ’19.

Hornstein Presents Papers at American Economic Association Conference

Abigail Hornstein

Abigail Hornstein

Abigail Hornstein, associate professor of economics, presented two papers at the 2017 American Economic Association meeting held Jan. 6-8 in Chicago.

In her working paper, “Words vs. Actions: International Variation in the Propensity to Honor Pledges,” Hornstein used data on contracted and utilized foreign direct investment in China to show that firms fulfill an average of 59 percent of their pledges within two years. “The propensity to fulfill contracts is lower for firms from countries with greater uncertainty avoidance, power distance and egalitarianism; and is higher if the source country is more traditional,” she explained. Prior literature has shown that these cultural characteristics are associated with higher levels of utilized foreign direct investment, while Hornstein shows that these cultural characteristics also affect the likelihood that planned corporate investments are actually made.

Her other working paper, “Board Overlaps in Mutual Fund Families” (co-authored by Elif Sisli Ciamarra of Brandeis University), is based on hand-collected data on directors at 3,948 U.S. equity mutual funds belonging to 328 fund families. Hornstein and Sisli Ciamarra used this data to document the prevalence and effects of a common board structure whereby a set of directors serves simultaneously on the boards of multiple funds within the family. Fifty-nine percent of all funds have unitary board structures where a single board serves all funds within the complex. “We find that overlapping boards generally represent 74 percent of the funds within a family, and that this overlapping board structure provides limited benefits to investors while benefiting the fund family,” she said.

In addition to her paper presentations, Hornstein also was elected to the executive board of the Association for Comparative Economics Studies, for a term ending in 2020.

Hornstein, Hounsell ’11 Co-Author Paper in Journal of Economics and Business

Abigail Hornstein

Abigail Hornstein

Associate Professor of Economics Abigail Hornstein and James Hounsell ’11 are the authors of a new paper published in The Journal of Economics and Business titled “Managerial investment in mutual funds: Determinants and performance implications.”

In the paper, Hornstein and Hounsell examine what determines managerial investments in mutual funds, and the impacts of these investments on fund performance. By using panel data they show that investment levels fluctuate within funds over time, contrary to the common assumption that cross-sectional data are representative. Managerial investments reflect personal portfolio considerations while also signaling incentive alignment with investors. The impact of managerial investment on performance varies by whether the fund is solo- or team-managed. Fund performance is higher for solo-managed funds and lower for team-managed funds when managers invest more. These results are consistent with the higher visibility of solo managers, and less extreme investment returns of team-managed funds. The results suggest investors may not benefit from all managerial signals of incentive alignment as managerial investments also reflect personal portfolio considerations.

Read the full paper here.

Hornstein Presents at American Financial Management Association Meeting

hornstein150Associate Professor of Economics Abigail Hornstein presented a paper at the 2015 American Financial Management Association Meeting, held in Orlando, Fla. Oct. 14–17.

Hornstein’s research paper, titled “Board Overlaps in Mutual Fund Families,” is co-authored with Elif Sisli Ciamarra of Brandeis University. Hornstein also was a discussant on a paper titled “Mutual fund home bias and market uncertainty” by Nicole Choi of the University of Wyoming and Hilla Skiba of Colorado State University.

Alumni Return to Wesleyan to Share Their Experiences in Finance

On Feb. 6, recent Wesleyan graduates returned to campus and shared their experiences in finance. The conference, titled “Finance — Theory and Applications: A Conversation with Alumni,” covered mergers and acquisitions, value investing, trading and case study analysis. Attendees also had an opportunity to ask questions.

Anand Gopalan ’09, James Hounsell ’11 and Eugene Wong ’09, all of whom have relevant experience in the field of finance, spoke at the event. Joyce Jacobsen, professor of economics, also gave remarks at the conference. The event was hosted by Abigail Hornstein, associate professor of economics, with support from the Allbritton Center for the Study of Public Life and the Wesleyan Investment Group.

“What I enjoyed most was the opportunity to hear how interested the financial industry is in hiring liberal arts-educated students,” said attendee Michael Smith ’18. “With a strong liberal arts background, at a competitive financial firm, within six to 12 months the liberal art graduate is on par with a [top undergraduate business school] graduate.”

Photos of the event are below: (Photos by Hannah Norman ’16)

Abigail Hornstein, associate professor of economics and James Hounsell '09 listen to Mattison Asher '17, at right,  who is one of the current leaders of the Wesleyan Investment Group (WIG).

Abigail Hornstein, associate professor of economics and James Hounsell ’11 listen to Mattison Asher ’17, at right, who is one of the current leaders of the Wesleyan Investment Group (WIG).

Hornstein, Nguyen ’12 Published in International Review of Financial Analysis

Abigail Hornstein, associate professor of economics, and her former thesis student, Zachary Nguyen ’12 are the co-authors of a paper titled “Is More Less? Propensity to Diversify via M&A and Market” published in the International Review of Financial Analysis, June 2014, pp. 64-88.

Mergers and acquisitions (M&A) could lead to a firm diversifying into new industries, and the impact of this may be related to the firm’s prior diversification. By using a panel of 1,030 M&A transactions from 2000-2010, Hornstein and Nguyen found that that previously diversified firms are more likely to pursue industrially diversifying M&A.

“Both previous and contemporary diversification measures are not associated with the firm’s cumulative abnormal returns (CAR) at time of announcement but have a lasting effect on various performance measures up to two years later,” Hornstein explained. “We find evidence supporting both a diversification discount and premium, which can be predicted by the sign of the CAR at time of announcement.”

Their study suggests that while diversification is necessary to explain firm value, it is not sufficient.

After graduating, Nguyen worked at Charles River Associates in Boston 2012-14 and is now a first year student at The University of California — Berkeley School of Law.

Cohen, Hornstein, Nakamura, Shusterman Awarded Tenure

Newly tenured faculty are, from left, Lisa Cohen, Abigail Hornstein, Miri Nakamura and Anna Shusterman.

Newly tenured faculty are, from left, Lisa Cohen, Abigail Hornstein, Miri Nakamura and Anna Shusterman.

The Board of Trustees recently conferred tenure to four Wesleyan faculty. Their promotions take effect July 1.

They are: Lisa Cohen, associate professor of English; Abigail Hornstein, associate professor of economics; Miri Nakamura, associate professor of Asian languages and literatures; and Anna Shusterman, associate professor of psychology. Other tenure announcements may be released after the Board’s May meeting.

“Please join us in congratulating them on their impressive records of accomplishment,” said Wesleyan President Michael Roth.

Brief descriptions of their areas of research and teaching are below:

Lisa Cohen joined the English Department’s creative writing faculty in Fall 2007. Her courses are focused on nonfiction writing, the literature of fact, modernism, and gender and sexuality studies. She has published a wide range of essays and the critically acclaimed book, All We Know: Three Lives (Farrar, Strauss and Giroux, 2012). In this work, she presents the biographies of three 20th-century women whose significance in modernist culture in England and the United States is equaled only by their absence from previous historical investigations. Critics have widely recognized the stylistic achievement of her writing, as well as the innovations of her archival project and her reframing of the genre of biography.

Abigail Hornstein teaches courses in a variety of areas, including corporate finance, investment finance, and econometrics. She has a particular interest in multinational strategy and China, and her work addresses such questions as how corporate characteristics affect the quality of corporate capital budgeting decisions, and how corporate and country-level governance mechanisms affect both foreign direct investment in China and the stock listing patterns abroad of Chinese firms.

Miri Nakamura teaches courses on literary and filmic approaches to Japanese modernity. More particularly, she works on Japanese literature from the Meiji era to the outbreak of the Second Sino-Japanese War in 1937 – with a focus on fantastic fiction, including robot literature and gender theory. In her forthcoming book, Monstrous Bodies: The Rise of the Uncanny in Modern Japan, she brings methodologies from literary studies, cultural history, and critical theory to bear on understanding the link between monstrosity and femininity in the modern Japanese imagination.

Anna Shusterman offers courses in developmental psychology and on relations between language and thought. Always interested in building bridges between laboratory-based findings and real-world interventions, she focuses on the cognitive development of young children and that of populations with varied linguistic backgrounds. Her research has shown multiple ways that humans become more effective at spatial and numerical reasoning once they master the relevant language, such as “left” and “right” in the domain of space or the natural numbers in the domain of mathematics.

Hornstein Published in Economic, Finance Journals

Assistant Professor of Economics Abigail Hornstein recently has had two academic papers published. In September 2012, her paper, “Usage of an estimated coefficient as a dependent variable,” co-authored with William Greene of New York University’s Stern School of Business, was published in the journal Economics Letters. The paper demonstrated the efficiency gains of a particular set of empirical estimation techniques. It is available online here.
In addition, Hornstein’s solo-authored paper, titled, “Corporate capital budgeting and CEO turnover,” was published in December 2012 in the Journal of Corporate Finance. In this paper, she demonstrated the considerable cross-sectional and inter-temporal variation in the quality of a firm’s corporate capital budgeting decisions, and how this is systematically affected by the nature of CEO turnover. It can be read here. Hornstein presented this paper at the Eastern Finance Association annual meeting in Boston in April, at a seminar at Clark University in October, and at the Financial Management Association annual meeting in Atlanta in October. Saumya Chatrath ’13 worked as a research assistant on this project in the summer of 2011 under the auspices of the Quantitative Analysis Center’s summer program.

Hornstein Authors Paper on Corporate Budgeting Decisions

Abigail Hornstein

A paper titled “Corporate Capital Budgeting Decisions and Information Sharing” by Abigail Hornstein, assistant professor of economics, was published in the Journal of Economics and Management Strategy on Oct. 24.

In the paper, Hornstein explains how firms must overcome agency and information asymmetry problems to make efficient corporate capital budgeting decisions; this is particularly true for firms with multiple units dispersed across geographic locations. Internal communication and coordination may therefore be crucial in reducing information asymmetry and achieving efficient resource allocation. We examine the relationship between corporate capital budgeting decisions and the degree of internal information sharing using a data set of 342 U.S. firms from 1993 to 2002. Information sharing is measured by the internal linkages observed in firms’ research and development activities worldwide. The efficiency of a firm’s capital budgeting decisions is measured by the deviation of the firm’s estimated marginal q from the theoretical tax-adjusted benchmark. Hornstein observes a significant relationship between value-enhancing capital budgeting decisions and stronger internal linkages. Specifically, corporate overinvestment is significantly reduced with better information sharing across units. All results are robust to firm- and industry-level controls.

In addition, Hornstein discussed a paper on financial development and innovation at a recent Financial Management Association conference in Denver, Colo. She also chaired a session on firm value.

Hornstein Published in Journal of Comparative Economics

Abigail Hornstein

Abigail Hornstein, assistant professor of economics, is the author of “Where A Contract Is Signed Determines Its Value: Chinese Provincial Variation in Utilized vs. Contracted FDI Flows,” published in the March 2011 edition of the Journal of Comparative Economics, 39(1).

In the article, Hornstein explains how there are major differences between ex ante corporate investment plans and ex post investments. The case of China is useful for understanding this problem because there is substantial time series and cross sectional variation in the ratio of utilized to contracted FDI (UC ratio), which is less than one in most province-year observations. Provinces may