How Does Policy Uncertainty Affect Investments? In this episode, university professors Kate Holland and Veljko Fotak explore academic research on the impact of policy uncertainty on investment decisions, markets, and firms. The episode underscores that high levels of policy uncertainty tend to depress corporate investment, hiring, and economic growth, as firms delay major expenditures. The conversation spans equity markets and higher risk premia, as well as ’flight to safety’ effects in bond markets and the crucial question: Why are markets seemingly not reacting to the high levels of uncertainty in the summer of 2025? TImeline: 00:00 How Does Policy Uncertainty Affect Investments? 06:01 Welcome to Questions in Finance 06:39 Defining and Measuring Policy Uncertainty 07:45 Economic Policy Uncertainty Index (EPU) 11:53 Historical Context and Validation of the EPU 16:47 Corporate Reactions to Policy Uncertainty 24:08 Impact on Mergers and Acquisitions 26:14 Research and Development During Uncertainty 30:14 Policy Uncertainty and Equity Markets 38:00 What is NOT Happening in 2025 47:42 Uncertainty and Bond Markets 49:39 Flight to Safety Mechanism 58:10 Political Uncertainty and Option Markets 59:06 Summary and Final Thoughts Bibliography: Atanassov, Julian, Brandon Julio, and Tiecheng Leng. ”The bright side of political uncertainty: The case of R&D.” The Review of Financial Studies 37, no. 10 (2024): 2937-2970. Azzimonti, Marina. ”Partisan conflict and private investment.” Journal of Monetary Economics 93 (2018): 114-131. Baker, Scott R., Nicholas Bloom, and Steven J. Davis. ”Measuring economic policy uncertainty.” The Quarterly Journal of Economics 131, no. 4 (2016): 1593-1636. Bianconi, Marcelo, Federico Esposito, and Marco Sammon. ”Trade policy uncertainty and stock returns.” Journal of International Money and Finance 119 (2021): 102492. Bonaime, Alice, Huseyin Gulen, and Mihai Ion. ”Does policy uncertainty affect mergers and acquisitions?.” Journal of Financial Economics 129, no. 3 (2018): 531-558. Boutchkova, Maria, Hitesh Doshi, Art Durnev, and Alexander Molchanov. ”Precarious politics and return volatility.” The Review of Financial Studies 25, no. 4 (2012): 1111-1154. Brogaard, Jonathan, and Andrew Detzel. ”The asset-pricing implications of government economic policy uncertainty.” Management science 61, no. 1 (2015): 3-18. Gulen, Huseyin, and Mihai Ion. ”Policy uncertainty and corporate investment.” The Review of Financial Studies 29, no. 3 (2016): 523-564. Hassan, Tarek A., Stephan Hollander, Laurence Van Lent, and Ahmed Tahoun. ”Firm-level political risk: Measurement and effects.” The quarterly journal of economics 134, no. 4 (2019): 2135-2202. Julio, Brandon, and Youngsuk Yook. ”Political uncertainty and corporate investment cycles.” The Journal of Finance 67, no. 1 (2012): 45-83. Kelly, Bryan, Ľuboš Pástor, and Pietro Veronesi. ”The price of political uncertainty: Theory and evidence from the option market.” The Journal of Finance 71, no. 5 (2016): 2417-2480. Leippold, Markus, and Felix Matthys. ”Economic policy uncertainty and the yield curve.” Review of Finance 26, no. 4 (2022): 751-797. Nguyen, Nam H., and Hieu V. Phan. ”Policy uncertainty and mergers and acquisitions.” Journal of Financial and Quantitative Analysis 52, no. 2 (2017): 613-644. Pastor, Lubos, and Pietro Veronesi. ”Uncertainty about government policy and stock prices.” The Journal of Finance 67, no. 4 (2012): 1219-1264. Pástor, Ľuboš, and Pietro Veronesi. ”Political uncertainty and risk premia.” Journal of Financial Economics 110, no. 3 (2013): 520-545. Wang, Junbo, Chunchi Wu, Xiaoguang Yang, and Ye Zhou. ”Policy uncertainty and corporate bond issuance costs.” Review of Quantitative Finance and Accounting (2025): 1-42. Soundtrack: The soundtrack is based on ”Walk on a Funky Street” by MondayHopes. Thanks for the music and keep up the good work! Use is under the Pixabay Content License.

Can You Invest Like Warren Buffett? In this episode of ’Questions in Finance,’ hosts Kate Holland and Veljko Fotak chat about the life and investment philosophy of Warren Buffett, exploring his journey from a young investor to the sixth richest man in the world. The discussion covers his unique approach to investing, the four pillars of his success, and the lessons learned from both his hits and misses in the investment world. Kate and Veljko also reflect on what makes Buffett special and whether his investment strategies can be replicated. Timeline: 00:00 Can You Invest Like Warren Buffett? 03:13 Welcome To Questions in Finance 09:32 The Four Pillars: Buffett’s Main Investments 14:24 Public vs. Private Holdings: A Financial Overview 21:00 Buffett’s Investment Hits and Misses 27:53 Buffett’s Political and Financial Maneuvering 30:55 The Williams Energy Rescue 37:40 Cash Reserves and Market Outlook 46:14 Characteristics of Buffett, a Successful Investor 52:12 Journalists’ Take on Buffett 54:04 What Makes Warren Buffett Special? 01:00:17 Warren Buffett’s Quotes 01:06:42 Let’s Summarize Our Warren Buffett Discussion 01:11:27 Buffett is Passing on the Reins to Greg Abel Soundtrack: The soundtrack is based on ”Walk on a Funky Street” by MondayHopes. Thanks for the music and keep up the good work! Use is under the Pixabay Content License.

Should Space Be Privatized? With William Megginson In this episode of ’Questions in Finance,’ Kate and Veljko explore the space economy with Bill Megginson, Professor and Price Chair in Finance at the University of Oklahoma. They discuss the history, financing, and future prospects of space exploration, focusing on the pivotal roles played by private enterprises like SpaceX and government entities such as NASA. The conversation highlights the dramatic reduction in launch costs, the rise of satellite technology, and the competition between the US and China. They delve into the financing challenges of space ventures, the impact of venture capital, and the broader economic implications, touching on topics from military applications to the pursuit of knowledge and technological spinoffs. The episode concludes with insights into the future roles of commercial and government sectors in space activities. Timeline: 00:00 16 Psyche and Quadrillions of Dollars 07:44 Spaceflight Economics 10:19 Today’s Guest, Bill Megginson 11:03 Should the Spaceflight Economy be Privatized? 15:02 Dogs. And Cats. 16:17 Basics and Stats of the Space Economy 21:23 A Bit of History 27:17 Costs and Benefits 35:06 Private-sector Efficiency, SpaceX 45:08 From the Outer Space Treaty to Artemis 49:13 The Race to Mars 53:58 Space Force! 59:44 Venture Capital in Space 01:10:55 Space Mining, Technology Transfer 01:19:16 Space Jobs 01:34:00 The Geopolitics of Space 01:41:26 Summarizing Bibliography: Megginson, William L. ”The Financial Economics of Spaceflight.” Available at SSRN 4901992 (2024). Weinzierl, Matthew. ”Space, the final economic frontier.” Journal of Economic Perspectives 32, no. 2 (2018): 173-192. Other Sources: Bureau of Economic Analysis data on the Space Economy: https://www.bea.gov/data/special-topics/space-economy Soundtrack: The soundtrack is based on ”Walk on a Funky Street” by MondayHopes. Thanks for the music and keep up the good work! Use is under the Pixabay Content License.

Who Paid for the 2018 Trade Tariffs? In this episode of ’Questions in Finance,’ Professors Kate Holland and Veljko Fotak discuss the academic research on the impact of the 2018 US trade tariffs. The conversation revolves around who ultimately paid for these tariffs—US consumers and importers—and the nuanced effects on retail prices. The discussion covers the impact of retaliatory tariffs on US exporters, before focusing on the winners—select US producers and the government, raising more revenue. The episode also explores the political implications, revealing how tariffs were strategically used to gain votes in battleground states and the broader economic consequences, including substantial redistribution of wealth and small net losses for the aggregate US economy. The episode concludes with a mapping of lessons from the past to the trade war emerging in 2025. Timeline: 00:00 Who Paid for the 2018 Trade Tariffs? 00:52 Welcome to Questions in Finance 01:31 The Three Papers 05:24 A Bit of Recent History 12:36 So... Who Pays? 16:03 Currency Adjustments 18:06 Retaliatory Tariffs 24:35 Import Prices Vs. Retail Prices 32:09 Quantifying the Impact of Tariffs 45:30 Summary of the Main Findings 49:31 The Political Effects 57:19 Future Episodes 58:01 Mapping What We Learned onto the Present 01:05:32 Concluding Remarks Bibliography: Amiti, Mary, Stephen J. Redding, and David E. Weinstein. ”The impact of the 2018 tariffs on prices and welfare.” Journal of Economic Perspectives 33, no. 4 (2019): 187-210. Cavallo, Alberto, Gita Gopinath, Brent Neiman, and Jenny Tang. ”Tariff pass-through at the border and at the store: Evidence from us trade policy.” American Economic Review: Insights 3, no. 1 (2021): 19-34. Fajgelbaum, Pablo D., Pinelopi K. Goldberg, Patrick J. Kennedy, and Amit K. Khandelwal. ”The return to protectionism.” The Quarterly Journal of Economics 135, no. 1 (2020): 1-55. Feng, Chaonan, Liyan Han, and Lei Li. ”Who pays for the tariffs and why? A tale of two countries.” (2023). SSRN Working Paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4477985 Soundtrack: The soundtrack is based on ”Walk on a Funky Street” by MondayHopes. Thanks for the music and keep up the good work! Use is under the Pixabay Content License.

Is a U.S. Sovereign Wealth Fund a Good Idea? In this episode of ’Questions in Finance,’ hosts Kate Holland and Veljko Fotak are joined by guest expert William Megginson, Professor and Price Chair in Finance at the University of Oklahoma, to discuss the concept of Sovereign Wealth Funds (SWFs). The conversation centers around a recent proposal for the creation of an American Sovereign Wealth Fund, initiated by an executive order from Donald J. Trump. Bill Megginson provides an in-depth exploration of what SWFs are, why countries establish them, and the various types that exist. The episode also debates whether a U.S. SWF is a good idea, considering both potential benefits and significant drawbacks. The discussion includes historical performance of SWFs, potential political interference, and alternative ways the U.S. could use its resources for economic and strategic purposes. Timeline: 00:00 Is a U.S. Sovereign Wealth Fund a Good Idea? 01:36 Welcome to Questions in Finance 02:14 Introducing Today’s Guest, Bill Megginson 08:03 A U.S. SWF? 3 out of 10! 09:08 SWF Definition and Purpose 22:11 SWFs, Strategic Funds, Stabilization Funds 27:22 SWF Underperformance 29:37 Political Distortions and Intergenerational Wealth 40:38 Industrial Policy 45:31 A U.S. SWF? How? 58:31 Issuing Bonds to Fund a SWF? 01:05:43 Government-Owned Venture Capital 01:15:46 Autocrats, Democrats, and SWFs 01:16:52 Space Economics! 01:18:29 Summary Bibliography: Bortolotti, Bernardo, Veljko Fotak, and William L. Megginson. ”The Sovereign Wealth Fund discount: Evidence from public equity investments.” The Review of Financial Studies 28, no. 11 (2015): 2993-3035. Holland, Kateryna. ”Government investment in publicly traded firms.” Journal of Corporate Finance 56 (2019): 319-342. Megginson, William L., Xin Yue Zhou, and Robert L. Gholson. ”The case against a U.S. Sovereign Wealth Fund.” Financial Review 60, no. 1 (2025): 5-12. Other Sources: Stephen Jen in the Financial Times, February 17, 2025, ”Don’t dismiss Donald Trump’s idea of a Maga SWF” https://www.ft.com/content/de289862-d5eb-4376-9c4a-d6e08b6b324b White House SWF Order: https://www.whitehouse.gov/presidential-actions/2025/02/a-plan-for-establishing-a-united-states-sovereign-wealth-fund/ Soundtrack: The soundtrack is based on ”Walk on a Funky Street” by MondayHopes. Thanks for the music and keep up the good work! Use is under the Pixabay Content License.

Should Investors Care About Corporate Culture? In this episode, hosts Kate Holland and Veljko Fotak delve into the significance of corporate culture and its impact on firm performance and investor portfolios. They discuss the struggle to measure corporate culture, using examples like Steve Jobs at Apple where storytelling helped create an innovative environment. The conversation extends to whether cultural aspects of respect, integrity, teamwork, innovation, and quality influence profitability. They explore research linking corporate culture with stock returns, fraud prevention, and adaptability. The discussion also covers the influence of societal culture on corporate behavior and how factors like regulatory changes and leadership shifts affect corporate culture. They conclude by suggesting that investors should be cautious of firms showing reduced innovation, high-risk cultures, or inconsistent communication of their corporate values. Timeline: 00:00 Culture, Stories, and Shared Beliefs 06:37 Welcome to Questions in Finance 07:15 Defining Corporate Culture 12:32 Corporate Culture and Intangible Assets 23:44 Country-level Cultural Traits and Corporate Culture 31:36 Changing Corporate Culture 36:37 Strategic Communication of Cultural Values 46:07 Corporate Culture and Firm Performance 51:27 Fraudulent Firms and Market Penalties 59:32 Risk Culture in Banks 01:02:43 Parking Tickets 01:11:16 Measuring Corporate Culture 01:14:31 Culture Examples: Skechers, Nike, Kodak, Xerox, Sony and More... 01:27:03 Summary & Goodbye! For complete show notes, please see: https://questionsinfinance.podbean.com/

Do Pension Bailouts Create Moral Hazard? With Michael Dambra In this episode of ’Questions in Finance,’ host Veljko Fotak dives into the complex world of moral hazard and pension bailouts with guest Michael Dambra, the Kenneth Colwell Chair of Accounting and Law at the University at Buffalo. They discuss the concept of moral hazard, its historical context, and its implications in modern economics, particularly focusing on recent pension bailouts under the American Rescue Plan (ARP). The conversation sheds light on how bailout expectations can alter financial behavior and risk-taking in the pension fund sector. Mike and Veljko discuss potential alternatives, but also political implications: why this plan was such an ineffective vote-buying scheme, and why taxpayers are the big losers. Timeline: 00:00 Minus Kate, plus Mike 01:16 Understanding Moral Hazard 02:56 Historical Context of Moral Hazard 06:41 Welcome to Questions in Finance! 07:22 Mike Dambra’s Background and Research 08:43 The Crisis in Pension Funding 18:18 The American Rescue Plan and the Butch Lewis Act 24:26 Research Design and Findings 35:01 Which Funds Get Bailouts? 38:30 Behavior of Plans Receiving Bailouts 41:06 Assessment and Alternatives 43:15 Comparing Pension and Banking Sectors 47:37 More on Alternatives 49:11 Bailouts, Politics, and Spin 51:36 Winners and Losers of the Bailout 54:42 Political Bias in Research 01:00:54 Who Cares? 01:05:41 Can Bailouts Impose Discipline? 01:08:58 How about a National Pension System? 01:09:49 Defined Benefits vs. Defined Contributions 01:11:11 Final Thoughts and Future Plans Bibliography: Arrow, Kenneth J. ”Uncertainty and the welfare economics of medical care.” American Economic Review 53, no. 5 (1963): 941-973. Dambra, Michael, Phillip J. Quinn, and John Wertz. ”Economic consequences of pension bailouts: Evidence from the American Rescue Plan.” Available at SSRN 4406502 (2023). Novy‐Marx, Robert, and Joshua Rauh. ”Public pension promises: How big are they and what are they worth?.” The Journal of Finance 66, no. 4 (2011): 1211-1249. Online Sources: Department of Labor Report Links: http://www.dol.gov/newsroom/releases/ebsa/ebsa20241101 Soundtrack: The soundtrack is based on ”Walk on a Funky Street” by MondayHopes. Thanks for the music and keep up the good work! Use is under the Pixabay Content License.

Is Short Selling Evil? Kate and Veljko delve into the contentious topic of short selling. The discussion begins with an explanation of viatical settlements and transitions into an in-depth exploration of short selling—its mechanisms, benefits, and ethical implications. The hosts examine the historical and legal controversies surrounding it and present empirical research highlighting its role in market efficiency and managerial discipline. They also touch on notable anecdotes, including the GameStop saga and the Vatican’s criticism of financial markets, and ultimately aim to dispel common misconceptions about short selling by emphasizing its overall positive impact on financial markets. 00:00 Viatical Settlements 09:42 Welcome to Questions in Finance! 10:20 Defining Short Selling 14:29 Put Options Vs. Short Sales 15:53 Risk Exposure 17:07 Negative Information, Prices, and the Case of GameStop 32:11 Wirecard 39:14 The Pope and the Chairman Walk Into a Bar... 48:32 Pricing Efficiency, Bubbles 59:13 Short Sales and Corporate Governance 01:15:42 Empty Voting 01:19:29 Summarizing, Wrapping Up Bibliography: Bargeron, Leonce, and Alice Bonaime. ”Why do firms disagree with short sellers? Managerial myopia versus private information.” Journal of Financial and Quantitative Analysis 55, no. 8 (2020): 2431-2465 Battalio, Robert, and Paul Schultz. ”Options and the bubble.” The Journal of Finance 61, no. 5 (2006): 2071-2102. Beber, Alessandro, and Marco Pagano. ”Short‐selling bans around the world: Evidence from the 2007–09 crisis.” The Journal of Finance 68, no. 1 (2013): 343-381. Boehmer, Ekkehart, and Juan Wu. ”Short selling and the price discovery process.” The Review of Financial Studies 26, no. 2 (2013): 287-322. Bris, Arturo, William N. Goetzmann, and Ning Zhu. ”Efficiency and the bear: Short sales and markets around the world.” The Journal of Finance 62, no. 3 (2007): 1029-1079. Brogaard, Jonathan, Terrence Hendershott, and Ryan Riordan. ”High frequency trading and the 2008 short-sale ban.” Journal of Financial Economics 124, no. 1 (2017): 22-42. Brunnermeier, Markus K., and Martin Oehmke. ”Predatory short selling.” Review of Finance 18, no. 6 (2014): 2153-2195. Chen, Yi-Wen, Sheng-Syan Chen, and Robin K. Chou. ”Short-sale constraints and options trading: Evidence from Reg SHO.” Journal of Financial and Quantitative Analysis 55, no. 5 (2020): 1555-1579. Curtis, Asher, and Neil L. Fargher. ”Does short selling amplify price declines or align stocks with their fundamental values?.” Management Science 60, no. 9 (2014): 2324-2340. Fang, Vivian W., Allen H. Huang, and Jonathan M. Karpoff. ”Short selling and earnings management: A controlled experiment.” The Journal of Finance 71, no. 3 (2016): 1251-1294. Fotak, Veljko, Vikas Raman, and Pradeep K. Yadav. ”Fails-to-deliver, short selling, and market quality.” Journal of Financial Economics 114, no. 3 (2014): 493-516. Haruvy, Ernan, and Charles N. Noussair. ”The effect of short selling on bubbles and crashes in experimental spot asset markets.” The Journal of Finance 61, no. 3 (2006): 1119-1157. Hu, Henry TC, and Bernard Black. ”The new vote buying: Empty voting and hidden (morphable) ownership.” S. Cal. L. Rev. 79 (2005): 811. Massa, Massimo, Bohui Zhang, and Hong Zhang. ”The invisible hand of short selling: Does short selling discipline earnings management?.” The Review of Financial Studies 28, no. 6 (2015): 1701-1736. Rapach, David E., Matthew C. Ringgenberg, and Guofu Zhou. ”Short interest and aggregate stock returns.” Journal of Financial Economics 121, no. 1 (2016): 46-65. Scheinkman, Jose A., and Wei Xiong. ”Overconfidence and speculative bubbles.” Journal of Political Economy 111, no. 6 (2003): 1183-1220. Media: CFTC Letter: https://www.cftc.gov/PressRoom/PressReleases/7761-18 The soundtrack is based on ”Walk on a Funky Street” by MondayHopes. Thanks for the music and keep up the good work! Use is under the Pixabay Content License.

Do Woke Firms Go Broke? Part 2 In this episode of ’Questions in Finance,’ university professors Kate Holland and Veljko Fotak delve into the ’S’ (social) aspect of ESG (Environmental, Social, and Governance) in corporate social responsibility. They discuss the concept of ’double bottom line’ companies that care about both operating profits and social responsibility, highlighting various facets of social responsibility including gender equality, parental leave policies, and worker safety. The hosts review academic studies on these topics, explore the impact of corporate scandals on reputation and valuation, and debate the performance of anti-woke funds. The episode concludes with a hopeful message that socially responsible firms do not underperform, illustrating that firms can be good corporate citizens without sacrificing profitability. Timeline: 00:00 Do Double-Bottom-Line Firms Bottom Out? 01:36 Welcome 02:14 Defining ”Social” 03:18 Labor-Friendly Policies, Equity, and Firm Value 09:58 Causality and the Maslow-Fotak-Holland Hierarchy of Corporate Needs 25:33 Corporate Scandals and Social Reputation 31:54 The Cost of Murder 44:42 Anti-Woke Funds 53:43 Not all Customers and Investors are Alike 57:54 Wrapping Up - A Note of Optimism Bibliography: Ahern, Kenneth R., and Amy K. Dittmar. ”The changing of the boards: The impact on firm valuation of mandated female board representation.” The Quarterly Journal of Economics 127, no. 1 (2012): 137-197. Cohn, Jonathan, B. and Malcom I. Wardlaw. ”Financing constraints and workplace safety.” The Journal of Finance 71, no. 5 (2016); 2017-2058. Eckbo, B. Espen, Knut Nygaard, and Karin S. Thorburn. ”Valuation effects of Norway’s board gender-quota law revisited.” Management Science 68, no. 6 (2022): 4112-4134. Edmans, Alex. ”The link between job satisfaction and firm value, with implications for corporate social responsibility.” Academy of Management Perspectives 26, no. 4 (2012): 1-19. Fauver, Larry, Michael B. McDonald, and Alvaro G. Taboada. ”Does it pay to treat employees well? International evidence on the value of employee-friendly culture.” Journal of Corporate Finance 50 (2018): 84-108. Fotak, Veljko, Kateryna Holland, Vishal Sharma. ”The cost of murder: Shareholder response to a social reputation shock.” Working Paper. Friede, Gunnar, Timo Busch, and Alexander Bassen. ”ESG and financial performance: aggregated evidence from more than 2000 empirical studies.” Journal of Sustainable Finance & Investment 5, no. 4 (2015): 210-233. Knittel, Christopher R., and Victor Stango. ”Celebrity endorsements, firm value, and reputation risk: Evidence from the Tiger Woods scandal.” Management Science 60, no. 1 (2014): 21-37. Gertsberg, Marina, Johanna Mollerstrom, and Michaela Pagel. ”Gender quotas and support for women in board elections.” Working Paper. Lins, Karl V., Lukas Roth, Henri Servaes, and Ann Tamayo. ”Sexism, culture, and firm value: Evidence from the Harvey Weinstein scandal and the #MeToo movement.” Journal of Accounting Research, (2024), forthcoming Liu, Tim, Christos Makridis, Paige Ouimet, and Elena Simintzi. ”The distribution of non-wage benefits: Maternity benefits and gender diversity.” Review of Financial Studies, 36, (2023): 194-234. Sonnenfeld, Jeffrey, Steven Tian, Steven Zaslavsky, Yash Bhansali, and Ryan Vakil. ”It pays for companies to leave Russia.” Working Paper. Online Sources and Media: Amrith Ramkumar, Amit (2022), ”Anti-ESG activist investor urges Chevron to increase oil production, Wall Street Journal, September 6, 2022.” Rajogpal, Shivaram, ”Does The Anti-Woke MAGA ETF Inadvertently Make The Case For ESG?” Forbes, October 3, 2022. Soundtrack: The soundtrack is based on ”Walk on a Funky Street” by MondayHopes. Thanks for the music and keep up the good work! Use is under the Pixabay Content License.

Do Woke Firms Go Broke? Part 1 In this episode of ’Questions in Finance,’ university professors Kate Holland and Veljko Fotak explore the intersection of corporate profitability and social responsibility. They examine whether companies prioritizing ESG (Environmental, Social, and Governance) or CSR (Corporate Social Responsibility) practices can also deliver strong financial returns. Using historical financial perspectives and empirical evidence, they analyze corporate earnings, stock returns, and the effects of governance on firm performance. The episode delves into various aspects of ESG, including environmental impact and ’greenium’—the premium returns of environmentally conscious firms—highlighting the positive correlation between good ESG practices and financial success. Featuring studies and case examples, this comprehensive discussion addresses the financial and ethical dynamics of socially responsible investing in modern markets. Timeline: 00:00 Introduction and Allbirds 03:42 Exploring the Concept of ’Woke’ Firms 08:30 A Narrow View of Corporate Performance 14:05 Governance and Its Impact on Returns 21:13 Environmental Policies and Firm Returns 27:19 Correlation vs. Causation in ESG Performance 28:45 Historical Context of ESG Concerns 30:24 Back from Break: Discussing Corporate Responsibility 35:52 Green Firms in Brown Industries 44:31 Summarizing ESG Performance 45:49 Wrapping Up and Looking Ahead Bibliography: Bolton, Patrick, and Marcin Kacperczyk. ”Do investors care about carbon risk?.” Journal of Financial Economics 142, no. 2 (2021): 517-549. Chan, Pak To, and Terry Walter. ”Investment performance of “environmentally-friendly” firms and their initial public offers and seasoned equity offers.” Journal of Banking & Finance 44 (2014): 177-188. Griffin, Dale, Omrane Guedhami, Kai Li, and Guangli Lu. ”National culture and the value implications of corporate environmental and social performance.” Journal of Corporate Finance 71 (2021): 102123. Derwall, Jeroen, Nadja Guenster, Rob Bauer, and Kees Koedijk. ”The eco-efficiency premium puzzle.” Financial Analysts journal 61, no. 2 (2005): 51-63. Friede, Gunnar, Timo Busch, and Alexander Bassen. ”ESG and financial performance: aggregated evidence from more than 2000 empirical studies.” Journal of Sustainable Finance & Investment 5, no. 4 (2015): 210-233. Gompers, Paul, Joy Ishii, and Andrew Metrick. ”Corporate governance and equity prices.” The Quarterly Journal of Economics 118, no. 1 (2003): 107-156. Houston, Joel F., Sehoon Kim, and Boyuan Li. ”One Hundred and Thirty Years of Corporate Responsibility.” Working Paper (2024). Pastor, Lubos, Robert F. Stambaugh, and Lucian A. Taylor. ”Dissecting green returns.” Journal of Financial Economics 146, no. 2 (2022): 403-424. Soundtrack: The soundtrack is based on ”Walk on a Funky Street” by MondayHopes. Thanks for the music and keep up the good work! Use is under the Pixabay Content License.

The Presidential Puzzle: Does the US Economy Perform Better under Democrat or Republican Presidents? In this episode of ’Questions in Finance,’ university professors Kate Holland and Veljko Fotak dive into an intriguing economic puzzle: why does public opinion favor Republicans as better managers of the economy, while macroeconomic indicators, corporate performance, and stock market returns generally show better outcomes under Democrat presidencies? And what explains some of the gap in performance? The discussion, grounded in academic research, explores various metrics, at the macroeconomic, firm, and market levels and the strength and robustness of findings. Kate and Veljko delve into common explanations, debunk the flawed ones, and emphasize the role of risk-aversion cycles and the timing of the Korean war and crude-oil shocks as having favored Democrat presidencies. The episode concludes with an exploration of party identity and political polarization, touching on the complex factors influencing electoral success and public perceptions. Timeline: 00:00 Introduction and Personal Anecdotes 01:17 Questions in Finance Podcast Introduction 02:08 Economic Performance Under Different Presidents 02:46 Public Perception vs. Economic Reality 05:04 The Presidential Puzzle 09:52 Diving into the Evidence 18:35 Corporate Performance Analysis 36:35 Exploring Explanations for Economic Trends 37:05 Cherry-Picking Time Periods: Valid or Not? 40:52 Impact of Crude Oil Shocks and the Korean War 43:51 Inherited Economic Conditions and Lead-Lag Effects 45:48 Risk Cycles and Economic Performance 50:36 Policy Explanations: Congress and Corporate Outcomes 59:34 Behavioral Explanations: Over-Optimism and Euphoria 01:03:20 Summarizing the Presidential Puzzle 01:06:06 Republican Electoral Success Despite Economic Trends 01:10:04 Party Identity and Political Polarization 01:11:45 Conclusion and Future Topics Bibliography: Alesina, Alberto and Howard Rosenthal. ”Partisan politics, divided government, and the economy.” Cambridge University Pres, 1995. Alesina, Alberto, Nouriel Roubini, and  Gerald D. Cohen. ”Political cycles and the macroeconomy.” MIT Press, 1997. Belo, Frederico, Vito D. Gala, and Jun Li. ”Government spending, political cycles, and the cross section of stock returns.” Journal of Financial Economics 107, no. 2 (2013): 305-324. Blinder, Alan S., and Mark W. Watson. ”Presidents and the US economy: An econometric exploration.” American Economic Review 106, no. 4 (2016): 1015-1045. Holland, Kateryna, and Esther Im. ”Corporate Cash Flow Outcomes Across Presidencies: Still a Presidential Puzzle.” Working paper. Mian, Atif, Amir Sufi, and Nasim Khoshkhou. ”Partisan bias, economic expectations, and household spending.” Review of Economics and Statistics 105, no. 3 (2023): 493-510. Potrafke, Niklas. ”Government ideology and economic policy-making in the United States—a survey.” Public Choice 174 (2018): 145-207. Santa‐Clara, Pedro, and Rossen Valkanov. ”The presidential puzzle: Political cycles and the stock market.” The Journal of Finance 58, no. 5 (2003): 1841-1872. Snowberg, Erik, Justin Wolfers, and Eric Zitzewitz. ”Partisan impacts on the economy: evidence from prediction markets and close elections.” The Quarterly Journal of Economics 122, no. 2 (2007): 807-829. Online Sources: EPI Report: https://epiaction.org/2024/04/02/economic-performance-is-stronger-when-democrats-hold-the-white-house/#full-report Belfer Center Study: https://www.belfercenter.org/publication/historical-puzzle-us-economic-performance-under-democrats-vs-republicans Soundtrack: The soundtrack is based on ”Walk on a Funky Street” by MondayHopes. Thanks for the music and keep up the good work! Use is under the Pixabay Content License.