The 5th Annual Symposium 2019 took place on Friday, October 11th, 2019 from 8:30am to 6:30pm. *Subject to change
|8:30 – 9:00 a.m.||Registration & Breakfast|
|9:00 – 9:10 a.m.||CDAR Year 5
Lisa Goldberg, co-Director, CDAR
|9:10 – 10:00 a.m.||
“Machine learning for inclusive finance: thoughts and practice”
Talk Abstract: Machine learning is a critical driving force for inclusive finance. In this talk, I will discuss some important challenges we face in addressing inclusive finance problems, and present several machine learning technologies we have developed to overcome these challenges and their applications in microlending, risk control, insurance claiming process, marketing and customer service.
|10:00 – 10:50 a.m.||“Aggregate Confusion: Divergence in ESG Ratings”
Roberto Rigobon, MIT
Talk Abstract: This paper investigates the divergence of environmental, social, and governance (ESG) ratings. First, the paper documents the disagreement between the ESG ratings of five prominent rating agencies. The paper proceeds to trace the disagreement to the most granular level of ESG categories that is available and decomposes the overall divergence into three sources: Scope divergence related to the selection of different sets of categories, measurement divergence related to different assessment of ESG categories, and weight divergence related to the relative importance of categories in the computation of the aggregate ESG score. We find that measurement divergence explains more than 50 percent of the overall divergence. Scope and weight divergence together are slightly less important. In addition, we detect a rater effect, i.e., the rating agencies’ assessment in individual categories seems to be influenced by their view of the analyzed company as a whole. The results allow investors, companies, and researchers to understand why ESG ratings differ.
|10:50 – 11:20 a.m.||BREAK|
|11:20 – 12:10 p.m.||“Pricing Risks from Climate Change”
Solomon Hsiang, UC Berkeley
Talk Abstract: Understanding the social and economic consequences of climate change is fundamentally a risk analysis, since climate change alters the underlying probabilities that different types of natural events (e.g. hurricanes) occur. I will describe many of the advances we have made in applying risk analysis to evaluate the potential impacts of climate change on society and the economy, from affecting civil wars and human health to slowing GDP growth and accelerating asset depreciation. I will discuss how these analyses affect what we understand about the value of investments that mitigate climate change or help us adapt to its effects.
|12:10 – 1:10 p.m.||LUNCH|
|1:10 – 2:00 p.m.||“Long-History PCA Estimation of Stock Return Factor Models”
Robert Anderson, CDAR
Talk Abstract: Traditionally, practitioners have believed that stock return factor models are not stable over histories longer than a medium horizon of TM = 250 or TM = 500 trading days (one or two years). We first show that Principal Components Analysis (PCA) consistently estimates factor loadings under essentially arbitrary variable volatility of factors. Then, we demonstrate empirically that the use of long histories such as TL = 1750 trading days, or seven years, improves the performance of optimized portfolios, compared to using a medium history of TM days, even when corrected for excess dispersion as proposed by Goldberg, Papanicalaou and Shkolnik (GPS). We find that the factor loadings of individual stocks and portfolios on long-horizon PCA factors are, in fact, relatively stable. We estimate factor loadings with a long history TL and estimate the current covariance matrix of the factors with a short data history (half-life TS = 40 days).
|2:00 – 2:30 p.m.||BREAK|
|2:30 – 3:20 p.m.||“Dimensional Analysis, Leverage Neutrality, and Market Microstructure Invariance”
Albert (Pete) Kyle, University of Maryland
Talk Abstract: This paper combines dimensional analysis, leverage neutrality, and a principle of market microstructure invariance to derive scaling laws expressing transaction costs functions, bid-ask spreads, bet sizes, number of bets, and other financial variables in terms of dollar trading volume and volatility. The scaling laws are illustrated using data on bid-ask spreads and number of trades for Russian and U.S. stocks. These scaling laws provide practical metrics for risk managers and traders; scientific benchmarks for evaluating controversial issues related to high frequency trading, market crashes, and liquidity measurement; and guidelines for designing policies in the aftermath of financial crisis.
|3:20 – 6:00 p.m.||RECEPTION|
|3:50 – 4:50 p.m.||“Exploring elusive end-to-end implementations of transformative artificial intelligence (AI) & machine learning (ML)”
Mallik Tatipamula, Ericsson North America
Nicole Hu, One Concern
Stuart Evans, CMU-Emirates iLab
The collection of widely available artificial intelligence (AI) & machine learning (ML) tools has become a catalyst for new approaches to transform processes ranging from image recognition to self-driving vehicles. Some of these AI & ML tools have revolutionized the way advertising targets consumers. Despite these successes, AI & ML tools have yet to materially transform most large corporations. Regardless, most large firms continue to invest heavily in these areas. These investments tend to be skewed toward algorithm development with insufficient investment in data collection & curation and organizational education & design. Little investment focuses on how best to make productive use of insights arising from these tools. This lack of focus on end-to-end implementations of these AI & ML tools is one hypothesis for why these new tools have had so little impact on corporate profitability. Another hypothesis for failure relates to mis-application of particular approaches/algorithms to use cases.
This panel will explore these hypotheses and discuss the state-of-the-art in AI & ML for large firms with a focus on what can be done to realize value from investments in workflow areas where these tools should produce more value.
Areas where AI & ML tools should be more productive (but are not—despite considerable investment):
|4:50 – 5:00 p.m.||Closing Remarks
Lisa Goldberg, CDAR