Undergraduate Business Journal - April 2015

April 2015

David Grossman

In this paper, I use a stratified single variable regression analysis to explore the causal impact of the publishing of financial filings with the Securities and Exchange Commission (SEC) on real time market prices and volume. The intended purpose of SEC filing requirements is to encourage transparent dissemination of relevant information to shareholders. My work aims to evaluate whether entities in the market actively monitor the SEC in order to be the first to trade on recent filing information. I found that the average filing is associated with a 0.0091% change in stock price in the first five minutes after its posting but that this relationship is not statistically significant. More importantly, I found a highly statistically significant relationship (p<0.001) between filings and volume. On average, I found that a filing results in a 36.7% increase in volume traded in the first five minutes after its posting. My findings indicated that markets were more responsive to filings which contained new information about the company than they were to notifications of trades made by other investors. In addition, markets were particularly sensitive to the disclosure of transactions and holdings of directors, officers, and beneficial owners of registered companies.  Lastly, I tested for the existence of insider trading and information leakage: the market reaction to SEC filings beginning just prior to their actual publication.  While I did find weak cumulative evidence of insider trading based on the direction and magnitude of the observed effect, that effect was not statistically significant. 

Enoch Chan and Yuan Fei

Media reports on the startup industry, and on tech startups in particular, point to a prominent bandwagon phenomenon. This implies that capital is not being efficiently allocated in the venture capitalist (VC) and startup industry, which may lead to bubble formation. In our study we attempt to quantitatively analyze the pure effect of the funding received by a startup in past rounds on the amount they receive in a current round to test the possibility of inflationary startup valuation due to this bandwagon effect in the industry. Our analysis incorporates factors highlighted in past qualitative studies in explaining venture capital investment decisions as controls to isolate the effect of past funding from startup characteristics such as management experience, etc. With our panel data we use an Ordinary Least Squares (OLS) regression model and a fixed-effects model for estimation. Our basic OLS regression model shows that past funding has a significant, positive effect on funding in the current round. Furthermore, we found that past funding plays an increasingly important role in determining venture investment decisions. However, using a fixed-effects model to remove possible omitted variable bias caused by time-invariant, unobservable variables, we found that previous funding no longer positively affects amounts raised. Surprisingly, we found significant, negative effects of past funding, which provide evidence against venture capitalists being significantly subject to the “hype” surrounding a startup.

Alexander Pizzirani

Over the last few years, 3D printing has gone from being relatively unknown outside of the manufacturing industry to being hailed as a revolutionary technology that would yield “a factory on every desk” before retreating from the limelight as current technological limitations became more widely understood (The Economist). Despite these limitations and the corresponding decrease in popular interest, it is apparent that, just like the sudden boom in interest that preceded it, this sudden decrease in interest is also out of proportion given the remaining limitations of the technology and the sector as a whole. In particular, it is apparent that in the consumer space 3D printers are still becoming more common and find a natural home in educational settings. Furthermore, despite the popular focus on consumer applications of 3D printing, it is industrial 3D printing that continues to experience significant growth. At present, weaknesses in the value proposition are undermining the ability to justify the price for 3D printing for consumers. 

Kathleen Oliver

For over 65 years, the Egyptian government has subsidized food for the Egyptian population. While originally not a system targeted for the poor, since the late 20th century, the system has received increasing criticism for the financial and political burden it places on the government as it fails to target the poorest in Egypt. Examining the current income transfers to the poor in rural and urban areas, it becomes clear that while the rural areas contain the highest number of poor people, the urban areas receive the greatest benefits of food. In an effort to increase the self-targeting aspect of baladi bread, I suggest that the rural areas increase the extraction rate of the wheat flour in their bread to make it an inferior good. To reform the ration card system in urban areas, I analyze a digression calculated by the Task Force for Food Security to measure welfare to distinguish between urban poor and non-poor households. Suggesting the implementation of two different policies in a reformation of the subsidy system, I believe the Egyptian government can lower their expenditure on food subsidies by over 50 million LE and better target the poor.