2022 Symposium Agenda

Lisa Goldberg, co-Director, CDAR & BlackRock

"Adding Resilience (R) to the ESG conversation"

Judith Rodin, The Rockefeller Foundation

Jeff Bohn, One Concern

Urbanization, climate change, and globalization have made physical risk more salient than ever before. As executives, investors, analysts, and regulators grapple with catastrophic risk arising from climate change, the question of resilience for property, infrastructure, and companies has become a new topic related to ESG conversations. In this conversation, Dr. Rodin will discuss recent developments in this emerging resilience space.

"Impact of Impact Investing" joint with Jules van Binsbergen

Jonathan Berk, Stanford

We evaluate the quantitative impact of ESG divestitures.  For divestitures to have impact they must change the cost of capital of affected firms. We derive a simple expression for the change in the cost of capital as a function of three inputs: (1) the fraction of socially conscious capital, (2) the fraction of targeted firms in the economy and (3) the correlation between the targeted firms and the rest of the stock market. Given the current state of ESG investment we find that the impact on the cost of capital is too small to meaningfully affect real investment decisions. We empirically corroborate these small estimates by studying firm changes in ESG status.  When firms are either included or excluded from the leading socially conscious US index (FTSE USA 4Good) we find no detectable effect on the cost of capital. We conclude that current ESG divesture strategies have had little impact and will likely have little impact in the future.  Our results suggest that to have impact, instead of divesting, socially conscious investors should invest and exercise their rights of control to change corporate policy.

“The Influence of Retail Investor Attention and Demand on Stock Prices”

Terrance Odean, UC Berkeley

Retail order imbalance positively predicts returns, but in aggregate retail investor trades lose money. Why? Order imbalance tests equally weight stocks, but retail purchases concentrate in stocks that subsequently underperform. Long-short strategies based on extreme quintiles of retail order imbalance earn annualized returns of -15.3% among stocks with heavy retail trading but earn 6.76% among other stocks. Our results reconcile the literatures on the performance of retail investors, the predictive content of retail order imbalance, and attention-induced trading and returns. We also find evidence that trades by retail investors with less knowledge, experience, and wealth are more likely to underperform.

BREAK

"Artificial Intelligence, Algorithmic Pricing, and Collusion"

Emilio Calvano, University of Bologna

Increasingly, algorithms are supplanting human decision-makers in pricing goods and services. To analyze the possible consequences, we study experimentally the behavior of algorithms powered by Artificial Intelligence (Q-learning) in a workhorse oligopoly model of repeated price competition. We find that the algorithms consistently learn to charge supracompetitive prices, without communicating with one another. The high prices are sustained by collusive strategies with a finite phase of punishment followed by a gradual return to cooperation. This finding is robust to asymmetries in cost or demand, changes in the number of players, and various forms of uncertainty.

"Taxonomizing cyberattacks"

Herb Lin, Stanford

Cyberattacks come in many flavors and varieties, and there is no clear understanding of what a cyberattack is.  Means, ends, technologies, methodologies, and intentions are often conflated, resulting in substantial confusion and causing many of those affected by cybersecurity issues to talk past one another.   This talk hopes to be a modest contribution to clarifying some of these conversations.

CLOSING REMARKS

Robert Anderson, co-Director, CDAR

[Recording]