Fighting the shorts

Today, I saw this article on the FT about short sellers and how companies try to prevent them from hitting share prices is very related to my academic work.

The video is on the long side, but it explains what short sellers do, how they make money, and what companies do to fight short sellers.

This part spells outs the main motivating story in my paper with Melissa Prado and Jason Sturgess:

"Coincidentally, large investors in the company chose to withdraw some stock from the pool available to borrow, leaving short sellers wary they would be forced to close positions and brokers working to find stock to lend. The share price swiftly rebounded."

 

New Paper - Conglomerate Discount and Short Sales

An outstanding puzzle in Finance is why conglomerates are traded at a discount relative to focused firms. While some academics say that the discount doesn't even exist, we (hopefully!) bring a new angle to this discussion.

We show that conglomerates have less dispersion of opinions than focused firms and face relatively fewer short sales constraints. These two effects partially explains why we observe a discount, being due to trading frictions.

The first version of a paper (together with Adam Reed and Ed van Wesep) is on SSRN:
 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2636770

Any comments will be appreciated! 

Greece and Reality

So Greece accepted all conditions from the creditors. Is that a surprise to anyone other than the dreamers from the left that think money grows in trees? The EU made many mistakes and could have avoided lots of pain to everyone involved, but dealing with deluded politicians on the Greek side caused even greater harm. while is totally democratic that Greek citizens might not want the deal they offer,citizens from other countries can also democratically chose not to throw away money to a country that doesn't want to implement the painful reformss that are needed. As usual in life, there is no free lunch.

US Housing Market Value

I read this post with an interesting animated gif looking at US residential property values within each county in the US. Note how most of the value is concentrated in California and the Northeast. From what I read, this is an example of a cartogram. Cool.

It starts with a standard map where yellow means relatively cheap residential area, while the more red, the higher the value.

This is the static picture (with labels):

The Iron Price

People should realize that Brazil's 02-08 growth was in spite of Lula and PT. The current recession is because of him and his party.

Brazil is now paying  the price of PT's cronysm and their outdated economic ideas.

It is sad to say but it will take a long time to get out of this mess.

Don't Be a Jerk

Very nice (and long) article.  I liked this passage above all:

"To summarize: being a jerk is likely to fail you, at least in the long run, if it brings no spillover benefits to the group; if your professional transactions involve people you’ll have to deal with over and over again; if you stumble even once; and finally, if you lack the powerful charismatic aura of a Steve Jobs. (It’s also marginally more likely to fail you, several studies suggest, if you’re a woman.) Which is to say: being a jerk will fail most people most of the time."

There you go. Don't be a jerk!

Shame on you Brazil

Really embarrassed to be a Brazilian these days.

So many economic mistakes were made and we are now paying dearly for them. It will be a while until we get back on track...

http://next.ft.com/fc43ddc6-f94f-11e4-be7b-00144feab7de

Me and Dior and I

Today I went to the movies with myself to watch the Dior and I movie, which I highly recommend everyone to see. I usually enjoy these documentaries regardless of whether it's the editing that convey all of the magic.

Nonetheless, I particularly liked it for two reasons:

i) It's always amazing to see geniuses working and the ups and downs of creative processes. You can almost see the sparkle in Ralf Simons' eyes when he has a good idea and the feeling of elation once he sees his creations finally being shown to the world.

ii) At the same time, you can clearly see the pressure he goes through to deliver on his first collection and the tight deadline he's working on.

All this made me think about the process of writing an academic paper. While no movie director could ever make the process of a research paper even remotely interesting, the sudden realization of a good idea or a good outcome of your statistical tests are amazing. The small pleasures that makes this profession rewarding. The feeling that you are probably the first person in the world to see those results is great.

Anyway, watch the documentary. It's really good.

Adam Tooze's "Wages of Destruction" Review and 21st century Hyperpowers

I just read Brad DeLong's post on David Frum's review of the "Wages of Destruction".

Two observations to be made.

i) "Wages of Destruction" is an amazing book. I read it a few years ago and it has the best review of WW2 from an economic point of view I've read.

ii) Frum and De Long's analysis of how the British transitioned from no longer being a hyper power and the parallels to how the US should adjust to the likely emergence of China/India in the next 20-50 years are very interesting.