AUT Economics and Finance Department
Permanent link for this collectionhttps://hdl.handle.net/10292/10766
The AUT Economics and Finance Department has an established record and an on-going commitment to excellent research, high-quality supervision, and community and professional engagement. Members of the department sit on editorial boards and serve as referees for professional journals. The department has particular research strength in: Micro and macroeconomics, Econometrics, Industrial organisation, International trade and finance, Natural resource and environmental economics, Labour economics, Economic development, Health economics, and Public policy.
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Item Retail Investors, COVID and the Quality of the New Zealand Stock Exchange(SAGE Publications, 2024-04-27) Gilbert, Aaron; Tourani-Rad, AlirezaIn this article, we investigate the impact of the influx of retail investors during the COVID-19 lockdowns on the New Zealand Stock Exchange on the efficiency of the market. On one hand, these investors bring added liquidity to the market, which generally improves market efficiency, and on the other hand, many of these investors were inexperienced retail traders who are often viewed as noise traders harming market efficiency. This natural experiment allows us to investigate the impact of retail investors. Using a sample of 99 New Zealand Exchange listed companies, we collect intraday price and quote data from 1 January 2019 to 24 March 2021. We compute a range of market quality measures across three categories: trading costs, price efficiency and speed of information incorporation. Our results clearly indicate that the influx of retail investors has reduced market quality; in particular, we observe more price predictability and information being impounded into prices more slowly. JEL Classification: C10, G14, G20Item The Long-term Impact of Financial Literacy on Wealth: Evidence From Longitudinal Data(Elsevier BV, 2025-10-20) De Beckker, Kenneth; Frijns, Bart; Hubers, Frank; Derkx, SjuulThis paper investigates the long-term impact of financial literacy on wealth accumulation using unique longitudinal data on Dutch households, thereby resolving important endogeneity issues that plague cross-sectional analyses. We find that financial literacy significantly influences income and savings, driving wealth accumulation over time. The effects vary by age: younger individuals with higher financial literacy tend to earn more, whereas older individuals prioritize savings. Additionally, we identify a notable gender disparity, where financial literacy significantly influences wealth accumulation for men, but has no significant impact for women.Item Want NZ Banking to Be More Competitive? Then Make It Easier to Switch Banks(The Conversation, 2024-08-22) Gilbert, AaronItem KiwiSaver Shakeup: Private Asset Investment Has Risks That Could Outweigh the Rewards(The Conversation, 2025-02-03) Gilbert, AaronItem KiwiSaver at a Crossroads: Budget Another Missed Opportunity to Fix NZ’s Underperforming Retirement Scheme(The Conversation, 2025-05-23) Gilbert, AaronItem Subjective Models of Workers and Managers for Macroeconomic Expectations(American Economic Association, 2025-05-15) Kumar, Saten; Bruschi, Claudia; D'Acunto, Francesco; Weber, MichaelWe propose a measure of subjective models of the macroeconomy for firms and workers. Subjective models are highly heterogeneous across agents, and their distribution is similar within the groups of firm managers and workers. At the same time, the beliefs of managers and workers who hold the same subjective models are different in reaction to monetary shocks. The expected persistence of monetary policy tightening differs across managers based on their subjective models but not across workers. And the expected effect of monetary tightening on short-term inflation differs across workers based on their subjective models but not across managers.Item Social And Health Outcomes Around Divorce: Evidence From New Zealand(NBER, 2025-05-26) Dasgupta, Kabir; Johnston, Andrew; Kirkpatrick, Linda; Massenkoff, Maxim; Plum, AlexanderHow does family breakdown and divorce affect spouses and their children? We provide new evidence using a matched difference-in-differences design in rich administrative data from New Zealand. While most outcomes remain stable prior to separation, parents' mental health deteriorates in the lead-up. At separation, men's employment falls while women's rises, and women become much more likely to receive government benefits. Men temporarily double their criminal offending; about a third of the increase is domestic disputes. Both parents become more likely to be the victim of non-domestic crime as well. As for mental health, parents become more anxious and depressed at separation, and these remain elevated well after the couple has parted. Their children, too, face increased risks after separation: anxiety, depression, school absenteeism, and crime victimization all rise.Item A Stricter Canon: General Luce Models for Arbitrary Menu Sets(Elsevier, 2025-06-18) Rodrigues-Neto, Jose; Ryan, Matthew; Taylor, JamesAlós-Ferrer and Mihm (2025, Corollary 1) recently provided a characterisation the classical Luce model (Luce, 1959) when choices are observed for an arbitrarily restricted collection of menus, as is typical in experimental settings or when working with field data. They also characterise the general Luce model (ibid., Theorem 1), which allows choice probabilities to be zero, for the same setting. The latter characterisation involves a single axiom – the general product rule (GPR). An important special case of the general Luce model is obtained when the mapping from menus to the support of choice probabilities can be rationalised by a weak order. Cerreia-Vioglio et al. (2021) show that this special case is characterised by Luce’s (1959) choice axiom, provided choice is observed for all possible (finite) menus. The choice axiom is thus a fundamental “canon of probabilistic rationality”. We show that a natural – and surprisingly simple – strengthening of the GPR characterises the model of Cerreia-Vioglio et al. (2021) when the menu set is arbitrarily restricted. Our axiom implies the choice axiom, and is therefore a “stricter canon”.Item Expectation Formation in Financial Markets: Heterogeneity and Sentiment(Elsevier BV, 2025-08-01) Frijns, B; Huynh, T; Zwinkels, RCJWe set up an endowment based asset pricing model in which agents have heterogeneous expectations about future price levels. Expectations are a function of fundamentals or trends, both interacted with sentiment. Agents are able to switch between expectation formation functions based on past performance combined with sentiment. Estimation results on the S&P500 index as well as its constituents reveal that there is heterogeneity between agents, with substantial switching between groups. We find that sentiment has both a direct and an indirect effect on expectations. Specifically, heterogeneity between groups is increasing in sentiment, and higher sentiment reduces the frequency of switching between functions. Our results imply that the true expectation formation process is a dynamic process based on multiple information sources.Item Feedback Trading: The Intraday Case of Retail Derivatives(Wiley, 2024-06-26) Baule, R; Frijns, B; Schlie, SWe analyze retail order flow in terms of intraday feedback trading patterns. Using a unique data set of exchange trades and high-frequency quotes, we first provide evidence that retail investors actively and consciously respond to short-term intraday returns in a negative feedback, contrarian fashion. Second, we show that some retail investors also feedback trade on tick-by-tick returns. Third, we find that on average this behavior leads to significant losses on the day they open a position. These losses are primarily due to the bid-ask spread and to investors' timing inability, but not to market makers taking advantage of investors.Item The Price Impact of Tweets: A High-Frequency Study(Wiley, 2024-06-28) Yang, Ni; Fernandez-Perez, Adrian; Indriawan, IvanWe examine the mechanism by which social media sentiment affects stock prices. Specifically, we assess the impact of Twitter feeds on stock returns at the intraday level. We find that an increase in buyer-initiated trades has a significantly positive price impact. This impact, however, is stronger with an increase in the number of tweets and sentiment, and persists even after controlling for volatility, liquidity shock, and limit-order activity. The impact of Twitter sentiment on prices causes a lingering mispricing effect that is not fully assimilated at the intraday level. Rather, this mispricing takes several days to correct.Item Who Buys Bitcoin? The Cultural Determinants of Bitcoin Activity(Elsevier BV, 2022-11-01) Foley, S; Frijns, B; Garel, A; Roh, TYWe examine the relationship between national culture and a country's Bitcoin activity. Given that Bitcoin is a high-risk currency/investment that is frequently used for illegal purposes and whose market is relatively opaque, we focus on the cultural dimension of individualism, which has been related to financial market participation, risk-taking behavior, and overconfidence. Using unique data that includes the originating country for Bitcoin transactions, we examine the relationship between individualism and a country's Bitcoin activity for a sample of 80 countries between 2009 and 2020. We find a significant and positive relationship between a country's individualism and its use of Bitcoin consistent with cultural values affecting the demand for such high-risk currency/investments.Item Nonstandard Errors(Wiley, 2024-04-17) Menkveld, AJ; Dreber, A; Holzmeister, F; Huber, J; Johannesson, M; Kirchler, M; Neusüß, S; Razen, M; Weitzel, U; Abad-Díaz, D; Abudy, M; Adrian, T; Ait-Sahalia, Y; Akmansoy, O; Alcock, JT; Alexeev, V; Aloosh, A; Amato, L; Amaya, D; Angel, JJ; Avetikian, AT; Bach, A; Baidoo, E; Bakalli, G; Bao, L; Barbon, A; Bashchenko, O; Bindra, PC; Bjønnes, GH; Black, JR; Black, BS; Bogoev, D; Correa, SB; Bondarenko, O; Bos, CS; Bosch-Rosa, C; Bouri, E; Brownlees, C; Calamia, A; Cao, VN; Capelle-Blancard, G; Romero, LMC; Caporin, M; Carrion, A; Caskurlu, T; Chakrabarty, B; Chen, J; Chernov, M; Cheung, W; Chincarini, LB; Chordia, T; Chow, SC; Clapham, B; Colliard, JE; Comerton-Forde, C; Curran, E; Dao, T; Dare, W; Davies, RJ; Blasis, RD; Nard, GFD; Declerck, F; Deev, O; Degryse, H; Deku, SY; Desagre, C; Dijk, MAV; Dim, C; Dimpfl, T; Dong, YJ; Drummond, PA; Dudda, T; Duevski, T; Dumitrescu, A; Dyakov, T; Dyhrberg, AH; Dzieliński, M; Eksi, A; Kalak, IE; Ellen, ST; Eugster, N; Evans, MDD; Farrell, M; Felez-Vinas, E; Ferrara, G; Ferrouhi, EM; Flori, A; Fluharty-Jaidee, JT; Foley, SDV; Fong, KYL; Foucault, T; Franus, T; Franzoni, F; Frijns, B; Frömmel, M; Fu, SM; Füllbrunn, SC; Gan, B; Gao, G; Gehrig, TPIn statistics, samples are drawn from a population in a data-generating process (DGP). Standard errors measure the uncertainty in estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence-generating process (EGP). We claim that EGP variation across researchers adds uncertainty—nonstandard errors (NSEs). We study NSEs by letting 164 teams test the same hypotheses on the same data. NSEs turn out to be sizable, but smaller for more reproducible or higher rated research. Adding peer-review stages reduces NSEs. We further find that this type of uncertainty is underestimated by participants.Item On Practitioners Closed-Form GARCH Option Pricing(Elsevier BV, 2024-07-01) Mozumder, S; Frijns, B; Talukdar, B; Kabir, MHThis paper proposes a practitioner version of Heston and Nandi's (2000) (HN) model, which we term the Practitioner's Heston Nandi, or PHN model. We compare the option pricing and hedging performance of the PHN model vis-à-vis the HN model. Instead of using a one-period ahead volatility forecast for all options used in calibrations at any given time, the PHN model proposes using forward-looking ad-hoc volatilities (implied by market option prices) for each individual option and maturity in calibration and hedging. Since the proposed PHN model uses only option price data, it renders historical stock price data redundant, cutting the data requirement in derivative valuation. We employ options traded at CBOE for the period January 1, 2016 to December 31, 2018 and show that the proposed PHN model yields quick calibration and significantly improves pricing and hedging for European-style options.Item The Effect of Cultural Distance Between an Analyst and a CEO on Analysts’ Earnings Forecast Performance(Elsevier BV, 2021-08-01) Frijns, B; Garel, AWe examine how cultural distance between an analyst and a CEO is associated with earnings forecast performance. Using a sample of 283,062 analyst-firm-year earnings forecasts over the period 1992–2016, we find that greater cultural distance is associated with greater forecast error. This finding is robust to the use of alternative culture frameworks. We further document that our result is mainly driven by a culture effect rather than bilateral trust or a shared common language.Item National Culture and Corporate Risk-Taking Around the World(Elsevier BV, 2022-01-25) Frijns, B; Hubers, F; Kim, D; Roh, TY; Xu, YThis paper examines the effect of national culture on corporate risk-taking worldwide. Specifically, we focus on one particular cultural trait – Individualism – a culture dimension linked to risk-taking and overconfidence. Using a sample of 48 countries from 1998 to 2019 (a total of 111,697 firm-year observations), we document a positive relationship between Individualism and corporate risk-taking. This result is robust to potential endogeneity concerns, alternative default horizons, an alternative measure for corporate risk-taking, and alternative measures of Individualism.Item Accounting Choices in Data Envelopment Analysis(Springer Science and Business Media LLC, 2025-01-14) Cui, Claire Murong; Harrison, Julie A; Ng, Frederick; Rouse, PaulDue to the increasing availability of large-scale digitalized databases containing summarized financial accounting measures, a growing number of DEA models are using these variables. Where only accounting measures are used, we term these “FinDEA” models. Accounting measures are subject to accounting choices regarding recognition and measurement, which means that they are not necessarily equivalent to direct measures of underlying physical measures more commonly used in DEA. This paper investigates the impact of accounting choices on FinDEA results related to alternative accounting measures of capital. Using both simulated and real-world data, we find that accounting choices impact FinDEA results, with the magnitude influenced by the heterogeneity of the accounting choices and sample sizes. Our results suggest that the variations in accounting choices need to be considered as part of an assessment of the homogeneity of inputs and outputs when designing DEA models using accounting measures.Item Leaving the Past Behind: Effects of Clean Slate Regulation on Employment and Earnings(Elsevier BV, 2025-06) Dasgupta, Kabir; Ghimire, Keshar; Plum, AlexanderWe investigate the labor market implications of New Zealand’s clean slate initiative. The clean slate regulation allows automatic concealment of criminal records of previously convicted individuals who remain free of convictions for at least seven years (rehabilitation period) since their last sentence. We use detailed administrative data on criminal court charges to identify our sample of previously convicted individuals who are expected to have their criminal records automatically concealed upon completing their rehabilitation period. By linking our sample to high-frequency tax records including information on employment and earnings, we apply a difference-in-differences framework as well as models developed for staggered assignment of a treatment to study the causal mechanisms. Our analysis reveals that the clean slate reform did not affect eligible individuals’ employment propensity, but led to a modest but precisely estimated two-percent increase in monthly earnings of employed individuals.Item Pricing and Hedging of Variable Annuities With Path-dependent Guarantee in Wishart Stochastic Volatility Models(Elsevier, 2025-05-20) Da Fonseca, Jose; Patrick, WongThis paper presents the pricing of a path-dependent guaranteed minimum maturity benefit in the Wishart multidimensional stochastic volatility model and the Wishart affine stochastic correlation model. We derive a closed-form solution for the option price in these two models, requiring only the computation of a one-dimensional integration. Thanks to the remarkable analytical properties of these models, we also compute all sensitivities of the option price to the model parameters. An implementation illustrates the results, confirms that pricing is fast and accurate, and provides a framework for pricing and risk management of this product in Wishart stochastic volatility models.Item Beyond ‘Dummy Variable’: Progress and Potential of Gender Research in Management Accounting(Emerald, 2025-05-12) Ahmed, ZahirPurpose– This study aims to examine how gender is conceptualised and addressed within management accounting research, moving beyond its use as a mere “control variable” or “dummy variable”. It identifies dominant themes, highlights ongoing research gaps and proposes directions for developing more inclusive and critically engaged research. Design/methodology/approach– A systematic literature review of gender-related studies in management accounting was conducted, covering articles published in ranked “accounting journals” between 1990 and 2024. Thematic analysis was applied to synthesise key findings and highlight research gaps. Findings– The study identifies four dominant themes in the literature, revealing the persistent underrepresentation of gender-focused research in management accounting. While existing studies acknowledge gender, they largely focus on workplace dynamics and overlook how management accounting practices reflect, reinforce or challenge gendered structures. The study underscores the need for deeper theoretical engagement– particularly with feminist and intersectional perspectives– to critically assess gendered power dynamics in management accounting. Research limitations/implications– This study provides an impetus for advancing gender research in management accounting by promoting theoretical diversification, methodological pluralism and greater attention to intersectional and contextual dimensions. Originality/value– By synthesising existing research and identifying critical gaps, this study calls for a shift from viewing gender as a control or dummy variable towards a more integrated, theoretically informed and critically engaged approach to gender in management accounting.