Crowdsourcing is an increasingly popular phenomenon where companies solicit the help of the public in helping accomplish some of the activities commonly performed by employees or contractors. These activities can range from solving scientific problems that baffle the in-house experts to repetitive and boring tasks that are deemed too mundane for the employees. Other activities include content g...

This paper investigates the link between the optimal level of nonfinancial firms’ leverage and macroeconomic uncertainty. We develop a structural model of a firm’s value maximization problem that predicts that as macroeconomic uncertainty increases the firm will decrease its optimal level of borrowing. We test this proposition using a panel of non–financial US firms drawn from the COMPUSTAT qua...

We consider the long memory and leverage properties of a model for the conditional variance V 2 t of an observable stationary sequence Xt, where V 2 t is the square of an inhomogeneous linear combination of Xs, s < t, with square summable weights bj . This model, which we call linear ARCH (LARCH), specializes, when V 2 t depends only on Xt−1, to the asymmetric ARCH model of Engle (1990), and, w...

This paper proposes the new concept of stochastic leverage in stochastic volatility models. Stochastic leverage refers to a stochastic process which replaces the classical constant correlation parameter between the asset return and the stochastic volatility process. We provide a systematic treatment of stochastic leverage and propose to model the stochastic leverage effect explicitly, e.g. by m...

We study the impact of COVID-19 recession on capital structure publicly listed U.S. firms. Our estimates suggest leverage (Net Debt/Asset) decreased by 5.3 percentage points from pre-shock mean 19.6 percent, while debt maturity increased moderately. This de-leveraging effect is stronger for firms exposed to significant rollover risk, whose businesses were most vulnerable social distancing did n...

In this paper, we provide a new perspective for understanding cross-sectional properties of equity returns. We explicitly introduce financial leverage in a simple equity valuation model and consider the likelihood of a firm defaulting on its debt obligations as well as potential deviations from the absolute priority rule (APR) upon the resolution of financial distress. We show that financial le...

Economic and financial time series typically exhibit time varying conditional (given the past) standard deviations and correlations. The conditional standard deviation is also called the volatility. Higher volatilities increase the risk of assets, and higher conditional correlations cause an increased risk in portfolios. Therefore, models of time varying volatilities and correlations are essent...

Bagging is a procedure averaging estimators trained on bootstrap samples. Numerous experiments have shown that bagged estimates often yield better results than the original predictor, and several explanations have been given to account for this gain. However, six years from its introduction, bagging is still not fully understood. Most explanations given until now are based on global properties ...

Digital inequality, or the unequal access and use of information communication technologies, inhibits under-privileged people from opportunities in the digital world. Although government and private organizations have devoted considerable resources to address this inequality, issues remain unsolved. A theory-based investigation of the phenomenon is essential for effective policy-making and inte...