Optimal Reporting Systems With Investor Information Acquisition

This paper analyzes a manager's optimal ex-ante reporting system using a Bayesian persuasion approach (Kamenica and Gentzkow (2011)) in a setting where investors affect cash flows through their decision to finance the firm's investment opportunities, possibly assisted by the costly acquisition of additional information (inspection). I examine how the informativeness and the bias of the optimal system are determined by investors' inspection cost, the degree of incentive alignment between the manager and the investor, and the prior belief that the project is profitable. I find that a mis-aligned manager's system is informative

only when the market prior is pessimistic and is always positively biased; this bias decreases as investors' inspection cost decreases. In contrast, a well-aligned manager's system is fully revealing when investors' inspection cost is high, and is counter-cyclical to the market belief when the inspection cost is low: It is positively (negatively) biased when the market belief is pessimistic (optimistic). Furthermore, I explore the extent to which the results generalize to a case with managerial manipulation and discuss the implications for investment efficiency. Overall, the analysis describes the complex interactions among determinants of firm disclosures and governance, and offers explanations for the mixed empirical results in this area.

Efficient Prices at Any Cost: Does Algorithmic Trading Deter Information Acquisition?

I demonstrate a powerful tension between acquiring information and incorporating it into asset prices, the two core elements of price discovery. As a salient case, I focus on the transformative rise of algorithmic trading (AT) typically associated with improved price efficiency. Using a measure of the relative information content of prices and a comprehensive panel of 37,325 stock-quarters of SEC market data, I establish instead that algorithmic trading strongly decreases the net amount of information in prices. The increase in price distortions associated with the AT “information gap” is roughly $42.6 billion/year for U.S. common stocks around earnings announcement events alone. Information losses are concentrated among stocks with high shares of algorithmic liquidity takers relative to algorithmic liquidity makers, suggesting that aggressive AT powerfully deters fundamental information acquisition despite its importance for translating available information into prices.

The acquisition of abstract words by young infants.

Young infants' learning of words for abstract concepts like 'all gone' and 'eat,' in contrast to their learning of more concrete words like 'apple' and 'shoe,' may follow a relatively protracted developmental course. We examined whether infants know such abstract words. Parents named one of two events shown in side-by-side videos while their 6-16-month-old infants (n=98) watched. On average, infants successfully looked at the named video by 10 months, but not earlier, and infants' looking at the named referent increased robustly at around 14 months. Six-month-olds already understand concrete words in this task (Bergelson & Swingley, 2012). A video-corpus analysis of unscripted mother-infant interaction showed that mothers used the tested abstract words less often in the presence of their referent events than they used concrete words in the presence of their referent objects. We suggest that referential uncertainty in abstract words' teaching conditions may explain the later acquisition of abstract than concrete words, and we discuss the possible role of changes in social-cognitive abilities over the 6-14 month period.

A Longitudinal Investigation of Infant Gesture Use and Parent Speech: Unique and Dynamic Influences on Infant Vocabulary Acquisition

How do infants learn word meanings? Research has established the impact of both parent and child behaviors on vocabulary development, however the processes and mechanisms underlying these relationships are still not fully understood. Much existing literature focuses on direct paths to word learning, demonstrating that parent speech and child gesture use are powerful predictors of later vocabulary. However, an additional body of research indicates that these relationships don’t always replicate, particularly when assessed in different populations, contexts, or developmental periods.

The current study examines the relationships between infant gesture, parent speech, and infant vocabulary over the course of the second year (10-22 months of age). Through the use of detailed coding of dyadic mother-child play interactions and a combination of quantitative and qualitative data analytic methods, the process of communicative development was explored. Findings reveal non-linear patterns of growth in both parent speech content and child gesture use. Analyses of contingency in dyadic interactions reveal that children are active contributors to communicative engagement through their use of gestures, shaping the type of input they receive from parents, which in turn influences child vocabulary acquisition. Recommendations for future studies and the use of nuanced methodologies to assess changes in the dynamic system of dyadic communication are discussed.