Financial Robo-Analysts collectively produce a more balanced distribution of buy, hold, & sell recommendations than do human analysts, they seem less subject to behavioral biases & conflicts of interest

Coleman, Braiden and Merkley, Kenneth J. and Pacelli, Joseph, Man versus Machine: A Comparison of Robo-Analyst and Traditional Research Analyst Investment Recommendations (January 6, 2020). Available at SSRN: http://dx.doi.org/10.2139/ssrn.3514879

Abstract: Advances in financial technology (FinTech) have revolutionized various product offerings in the financial services industry. One area of particular interest for this technology is the production of investment recommendations. Our study provides the first comprehensive analysis of the properties of investment recommendations generated by “Robo-Analysts,” which are human-analyst-assisted computer programs conducting automated research analysis. Our results indicate that Robo-Analysts differ from traditional “human” research analysts across several dimensions. First, Robo-Analysts collectively produce a more balanced distribution of buy, hold, and sell recommendations than do human analysts, which suggests that they are less subject to behavioral biases and conflicts of interest. Second, consistent with automation facilitating a greater scale of research production, Robo-Analysts revise their reports more frequently than human analysts and also adopt different production processes. Their revisions rely less on earnings announcements, and more on the large, volumes of data released in firms’ annual reports. Third, Robo-Analysts’ reports exhibit weaker short-window return reactions, suggesting that investors do not trade on their signals. Importantly, portfolios formed based on the buy recommendations of Robo-Analysts appear to outperform those of human analysts, suggesting that their buy calls are more profitable. Overall, our results suggest that Robo-Analysts are a valuable, alternative information intermediary to traditional sell-side analysts.

Keywords: FinTech, Analysts, Robo-Analyst, Investment Recommendations
JEL Classification: G14, G24

Household Electrification & Economic Development--Impacts can vary even across individuals in neighboring villages: Households that were willing to pay more for a grid electrification may gain more from electrification compared to households that would only connect for free

Does Household Electrification Supercharge Economic Development? Kenneth Lee, Edward Miguel, and Catherine Wolfram. Journal of Economic Perspectives—Volume 34, Number 1—Winter 2020—Pages 122–144. https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.34.1.122

Abstract: In recent years, electrification has re-emerged as a key priority in low-income countries, with a particular focus on electrifying households. Yet the microeconomic literature examining the impacts of electrifying households on economic development has produced a set of conflicting results. Does household electrification lead to measurable gains in living standards or not? Focusing on grid electrification, we discuss how the divergent conclusions across the literature can be explained by differences in methods, interventions, potential for spillovers, and populations. We then use experimental data from Lee, Miguel, and Wolfram (2019) — a field experiment that connected randomly-selected households to the grid in rural Kenya — to show that impacts can vary even across individuals in neighboring villages. Specifically, we show that households that were willing to pay more for a grid electrification may gain more from electrification compared to households that would only connect for free. We conclude that access to household electrification alone is not enough to drive meaningful gains in development outcomes. Instead, future initiatives may work better if paired with complementary inputs that allow people to do more with power.

For supplementary materials such as appendices, datasets, and author disclosure statements, see the article page at https://doi.org/10.1257/jep.34.1.122

From 1992... Paul Romer's "Two Strategies for Economic Development: Using Ideas and Producing Ideas"

From 1992... Two Strategies for Economic Development: Using Ideas and Producing Ideas. Paul M. Romer. The World Bank Economic Review, Volume 6, Issue suppl_1, 1 December 1992, Pages 63–91, https://doi.org/10.1093/wber/6.suppl_1.63

Abstract: The key step in understanding economic growth is to think carefully about ideas. This requires careful attention to the meaning of the words that we use and to the metaphors that we invoke when we construct mathematical models of growth. After addressing these issues, this paper describes two different ways in which ideas can contribute to economic development. The history of Mauritius shows how a poor economy can benefit by using ideas from industrial countries within its borders. The history of Taiwan (China) shows how a developing economy can be pushed forward into the ranks of those that produce ideas for sale on world markets.

New neurocognitive-psychometrics account of mental speed that decomposes the relationship between mental speed and intelligence: They found that the speed of higher-order processing is greater in smarter individuals

Neurocognitive Psychometrics of Intelligence: How Measurement Advancements Unveiled the Role of Mental Speed in Intelligence Differences. Anna-Lena Schubert, Gidon T. Frischkorn. Current Directions in Psychological Science, February 13, 2020. https://doi.org/10.1177/0963721419896365

Abstract: More intelligent individuals typically show faster reaction times. However, individual differences in reaction times do not represent individual differences in a single cognitive process but in multiple cognitive processes. Thus, it is unclear whether the association between mental speed and intelligence reflects advantages in a specific cognitive process or in general processing speed. In this article, we present a neurocognitive-psychometrics account of mental speed that decomposes the relationship between mental speed and intelligence. We summarize research employing mathematical models of cognition and chronometric analyses of neural processing to identify distinct stages of information processing strongly related to intelligence differences. Evidence from both approaches suggests that the speed of higher-order processing is greater in smarter individuals, which may reflect advantages in the structural and functional organization of brain networks. Adopting a similar neurocognitive-psychometrics approach for other cognitive processes associated with intelligence (e.g., working memory or executive control) may refine our understanding of the basic cognitive processes of intelligence.

Keywords: intelligence, mental speed, psychometrics, cognitive modeling

Crimes, deterrence, & paying for more security guards: Restricting guards in sparse, rural markets and requiring guards in dense, urban markets could be socially beneficial

The Race Between Deterrence and Displacement: Theory and Evidence from Bank Robberies. Vikram Maheshri and Giovanni Mastrobuoni. The Review of Economics and Statistics, January 23, 2020. https://doi.org/10.1162/rest_a_00900

Abstract: Security measures that deter crime may unwittingly displace it to neighboring areas, but evidence of displacement is scarce. We exploit precise information on the timing and locations of all Italian bank robberies and security guard hirings/firings over a decade to estimate deterrence and displacement effects of guards. A guard lowers the likelihood a bank is robbed by 35-40%. Over half of this reduction is displaced to nearby unguarded banks. Theory suggests optimal policy to mitigate this spillover is ambiguous. Our findings indicate restricting guards in sparse, rural markets and requiring guards in dense, urban markets could be socially beneficial.

JEL classification: K42
Keywords: deterrence, displacement, spillover, policing, bank security guards