We document a significant change in the relationship between metropolitan and regional house prices during the COVID-19 pandemic. Given regional centres are spatially disconnected in Australia, we introduce a novel approach to defining submarkets based on common amenity. Treating the COVID-19 pandemic period as a negative shock to urban demand, we find that metropolitan areas became net recipients of house price volatility, while regional markets became net influencers during the pandemic, reversing the pre-COVID-19 submarket spillover pattern. This paper provides an economic context for ongoing regional housing unaffordability and discusses current policy responses that should be considered to address these challenges.

An unprecedented number of firms announced CEO salary reductions at the onset of the coronavirus pandemic. We document that the total compensation for these CEOs did not actually decrease but was instead restructured, leading to a marked increase in opaque components of compensation. These adjustments align with the managerial power view of executive pay setting, whereby heightened stakeholder outrage prompts greater camouflaging of compensation to avoid scrutiny. We further show that this pattern of compensation adjustments predominantly occurred in firms with powerful CEOs, weak institutional investor monitoring, and poorer governance quality.

We examine the impact of regulatory change on the innovative capabilities of newly public R&D intensive firms. Using a legal reform in 2017 that uniformly increased public disclosure requirements of clinical trial results for all biopharma firms, we document new evidence that biopharma firms experience a reduction in information asymmetries and a subsequent increase in post-IPO innovation. Biopharma firms treated by the regulation experience 9.8% less underpricing, on average gaining an additional $11.8 million in IPO proceeds, have a decrease in post-IPO stock volatility of 5.1%, and invest 1.0% more of total assets in quarterly R&D investment. This research demonstrates that regulation can improve the innovative capabilities of biopharma firms, which can contribute to these firms improving the affordability, availability and access to medical treatments.

This research examines how population migration to particular suburbs or regions across Australia affects house prices in different suburbs and regions.The research found that when people move into a particular region house prices increase not only in that region and close surrounding areas, but may also rise in other, more distant locations. Furthermore, these house price increases may also trigger successive population movements of people moving out of that first region and moving to other parts of the state or to other states, in turn triggering a succession of house price impacts in these new areas.The research also looked at migration patterns during COVID-19 and found that, with increased numbers of people migrating out of the state, Victoria became a strong contributor of house price changes in every other state or territory. Within each state and territory, the trend is for population movements from inner-city suburbs towards outer city areas and regional areas.The influx of people into regional cities led to a worsening of housing affordability, with limited stock and very low vacancy rates, in part due to the lack of social and affordable housing options in regional areas. Given the traditional attraction of regional areas as relatively affordable locations, these areas are home to a high proportion of low-income and tenant households who are facing rising housing costs.Besides targeting policies that provide financial support for households experiencing housing stress in regional areas, policy makers should be aware that policies focussed on particular regions can have unintended consequences for nearby regions. The connectivity that operates across open borders means that migration increases and house price rises due to a local policy may increase house prices for other regions that may not get a direct benefit from the policy.

Chief Executive Officer (CEO) compensation typically has several components. The disclosure of compensation items such as base salary, annual bonuses, long-term incentive pay and option compensation are strictly regulated for publicly traded firms. Any compensation that does not fit into these categories is reported as ‘Other’ compensation in regulatory filings. This paper describes a dataset containing disaggregated values for distinct components of Other CEO compensation. Other compensation includes pensions and deferred compensation, perquisites, and pay related to severance and change of corporate control actions. However, proprietary commercial databases contain only aggregated Other compensation values and it is inconsistently reported in regulatory filings limiting the use of current data scraping techniques. Access to this data allows examination of CEO power and optimal corporate governance. It could also be used to train machine learning algorithms to enhance regulatory filings scraping that may allow for a longer time period of Other compensation to be compiled.

This study examines the effect of investor birth cohorts on speculative investment preferences. Using retail trading and portfolio data from Finland over two decades, we find that individuals who have experienced desirable macro-economic and social conditions during adolescence, such as high gross domestic product (GDP) growth and low divorce rates, are more likely to invest in speculative stocks. A positive relation is found between the proportion of speculative-prone cohorts in the stock market and returns of stocks of lottery nature. We provide new evidence on the adverse effect of speculative investments, finding that cohorts with higher speculative investment weights on their portfolios achieve lower absolute and risk-adjusted returns. We also provide support for earlier research that identifies a positive association between recent portfolio performance and the propensity to invest in speculative stocks.

Housing prices in Australia have demonstrated strong growth in recent decades, and many argue housing supply is not keeping up with the demand. The Australian government purports to increase the private construction of new houses and availability of rental housing primarily through taxation offsets. However, inflated house prices are also at least partially explained by housing supply shortage. This work studies Australian residential property investors to understand their characteristics and role in contributing to the supply of rental housing. Using rich proprietary loan-level data on over 1.1 million mortgage applications during a period of stable policy and house price appreciation, we study the determining factors for accessing finance for the purpose of residential investment as opposed to owner-occupation. Our findings use historical data to present new evidence of the increasingly non-metropolitan location choice for real estate investment properties. This is a potential explanation for the shortage of suitable housing in metropolitan regions but may contribute to regional development.

The evolution of firms is not necessarily uniform. Exploring how this affects credit risk models, we find that firm life cycle provides additional explanatory power not captured by age. Firm age has an ambiguous effect on default risk and its impact during periods of high volatility is insignificant. Unobserved firm heterogeneity is an important determinant of credit default swap spreads and, when accounted for, riskier growth firms command a lower spread compared to mature firms that commonly benefit from the lowest spreads. Firms that age well by maintaining a growth profile are rewarded with lower cost of capital.

Machine learning is an increasingly key influence on the financial services industry. In this paper, we review the roles and impact of machine learning (ML) and artificial intelligence (AI) on the UK financial services industry. We survey the current AI/ML landscape in the UK. ML has had a considerable impact in the areas of fraud and compliance, credit scoring, financial distress prediction, robo-advising and algorithmic trading. We examine these applications using UK examples. We also review the importance of regulation and governance in ML applications to financial services. Finally, we assess the performance of ML during the Covid-19 pandemic and conclude with directions for future research.

Firms go public to make acquisitions, but private firms benefit from lower regulatory cost. Investment by newly public firms may be limited if managers need to focus on compliance instead of growth. Exploiting a 2012 US policy reform, we show that when regulatory cost is lower, firms make more acquisitions, do so more quickly after listing, and also increase other forms of investment. Examining potential unintended consequences of reduced regulation, we find that opportunistic bidding arising from higher information asymmetry does not explain these results. We inform the ongoing policy debate on broadening the scale and scope of regulatory relief.

Do residential real estate investors hold locally-concentrated or geographically-diversified portfolios? We identify a large sample of investors in the residential property market and measure the proximity of their investment properties to their owner-occupied address to study this question. We hypothesize that there is a preference among residential real estate investors to buy locally and find strong empirical support for this. This preference is in line with the results of 'home bias' research in other investment markets, yet contrasts with the documented benefits of geographic diversification in real estate markets. Our results indicate that the home bias may be partly mitigated by investor sophistication and is not driven by the relative purchasing power across geographic areas.

Price bubbles are a phenomenon of asset markets that contradicts market efficiency. In this paper we explore the prevalence of asset-price bubbles in Australian listed industrial equities and A-REIT markets. The Australian market is a unique setting to test for price bubbles, given the regular reference to price bubbles in sections of the media and the strength of the financial sector to the overall economy. In contrast to the US stock market, we find little evidence of price bubbles in historical returns of Australian markets (1992-2016). Our article also provides the reader with a consolidated review of three leading asset price bubble detection methodologies. Our review and results can help investors better understand price dynamics and contribute to policy discussions on financial stability.

Price bubbles are a phenomenon of asset markets that contradicts market efficiency. In this paper we explore the prevalence of asset-price bubbles in Australian listed industrial equities and A-REIT markets. The Australian market is a unique setting to test for price bubbles, given the regular reference to price bubbles in sections of the media and the strength of the financial sector to the overall economy. In contrast to the US stock market, we find little evidence of price bubbles in historical returns of Australian markets (19922016). Our article also provides the reader with a consolidated review of three leading asset price bubble detection methodologies. Our review and results can help investors better understand price dynamics and contribute to policy discussions on financial stability. Price bubbles are a phenomenon of financial markets, observed across time and asset classes. The concept of a price bubble is relatively easy to convey, being a rapid detachment in prices from fundamental values. However, in practice bubbles are challenging to detect ex post and arguably impossible to predict. Nevertheless, research in this area has important policy implications and a range of empirical approaches to bubble detection have emerged. This article makes two contributions. Firstly, we consolidate and provide a review of three leading asset price bubble detection methodologies. These are the variance bounds test, first proposed by Shiller (1981), West’s (1987) twostep test, and unit root tests. Secondly, we test for evidence of price bubbles in listed Australian equities and real estate securities using the two recent specifications of the unit root test. Empirical evidence as to the existence of price bubbles is mixed. Campbell and Shiller (1987) identify persistent deviations of stock prices from the present value of future dividends in an analysis of U.S. stocks using the S&P 500 composite index. Similar conclusions are drawn by Froot and Obstfeld (1991) and Craine (1993). Using an enhanced unit root methodology, Phillips et al (2011) and Phillips et al (2013) similarly identify statistically significant deviations from fundamentals in the U.S. stock market. Bohl (2003), however, shows that the tech-bubble of the 1990’s may drive the finding of a price bubble in U.S. stock prices. This follows Diba and Grossman’s (1988) rejection of the presence of price bubbles once additional pricing factors are incorporated alongside dividends in the market fundamental pricing relation. Evidence from more recent studies, those conducted at shorter time intervals, and for international markets is similarly inconclusive. Chung and Lee (1998) find no evidence of price bubbles in Hong Kong and Singaporean stock markets, but demonstrate a strong influence from non-fundamental factors in the pricing of Korean and Japanese stock markets. Jirasakuldech et al (2008) fail to identify a long-run relationship between prices, dividends, and earnings, taking this as evidence of price bubbles. Using the unit root price bubble detection methodology, we test for evidence of price bubbles in Australian listed equities and REITS using the S&P/ASX 200 Index Jamie Alcock, The University of Sydney Reuben Segara, The University of Sydney Angelo Aspris, The University of Sydney Danika Wright*, The University of Sydney Stephen Satchell, The University of Sydney Juan Yao, The University of Sydney * Corresponding author. The authors wish to thank Petra Andrlikova and Sean Foley for their early contributions. We also thank an anonymous referee and the editor Maurice Peat for their suggestions in improving the paper. We acknowledge the financial support from the Centre for International Finance and Regulation. This article reproduces results originally presented in a report ‘Asset Price Bubbles in the Australian Market’. For further discussion, we refer readers to the CIFR Report, Paper No. 119/2016. Available at SSRN: https://ssrn.com/abstract=2831806 or http://dx.doi.org/10.2139/ssrn.2831806 Introduction 1.0

This study examines stock market gambling using a comprehensive set of investor characteristics and past portfolio performance measures. We find that retail investors overinvest in 'lottery stocks', stocks with gambling-like properties. Significant portfolio underperformance is the result of gambling through lottery stocks. Investors are more likely to gamble following recent portfolio paper gains, regardless of realised performance, providing new evidence that paper gains trigger a house money effect. Investors trading greater values or holding more stocks, and older and female investors, are less likely to invest in lottery stocks.

Real estate buyers pay a premium for lucky properties. Using a large sample of Hong Kong apartment sales, we show that the transaction price itself is priced as a property attribute when it ends in a lucky 8 digit. This explains our observation of price clustering. Hedonic regression modelling is used to show that properties which sell at a lucky price also sell for a 1.4 percent premium, on average. Unlike lucky floor premium, lucky price premium does not exhibit luxury goods characteristics and is not sensitive property price cycles. This shows that the lucky price premium is attributed to cultural heuristics. The results are robust to alternative model specifications.

This paper focuses on U.S firms' acquisition strategy and payment options in response to changes in financial reporting requirements. We study the impact of Statement of Financial Accounting Standards (SFAS) 141, the accounting treatment of business combination, and its subsequent revision, SFAS 141(R), on firms' participation in M&A activities and choice of payment methods. SFAS 141 eliminated the pooling interest method of accounting. The Financial Accounting Standards Board (FASB) revised the standards in 2007, with the SFAS 141(R), in an attempt to enhance the ability of financial reports to reflect firms' financial situation. The revision strengthens the rules of accounting for contingent liabilities by requiring the fair value of earnouts to be recorded at acquisition date. In comparison, under the previous standards, earnouts were only recognised if, and, when, the payment contingency is resolved. Our results provide evidence that the frequency of stock deals (earnout deals) sharply decreases (increases) since SFAS 141, and this decrease (increase) is strongest among financially constrained bidders, who also decrease their participation in M&A markets. In addition, our results show that SFAS 141(R) diminishes the growth of earnout usage. A Heckman probit model is implemented to address sample selection bias. The implications of these findings for deal design and M&A motivations are discussed.

In a number of markets with high house prices, governments have implemented various forms of stamp duty. Stamp duty is a tax on the transfer of assets, including residential property. Policy-makers claim that stamp duty increases are an instrument through which they intend to decrease property demand, and ultimately ease housing costs. However, empirical evidence suggests that such taxes are ineffective in achieving this objective. We present evidence that the likely reason these taxes for this outcome is that the demand function of property buyers in these high house price markets are not elastic. The event study methodology is used to test the impact of stamp duty on the residential property price and transaction volume. Following this, we develop a model to show that the real impact of residential property stamp duties is an increase in government revenue. Governments in high housing cost markets face an agency-like problem when determining taxation policy. Our paper aims to examine the impact on government revenue from stamp duty using data from Hong Kong. Hong Kong presents a natural experiment in which to test our model. Often ranked as one of the world’s most expensive and unaffordable property markets, the Hong Kong government has introduced various stamp duties since 2010. While their stated aim is to stabilize housing prices and transactions, no prior studies have examined the effect of stamp duty on government revenue. Our findings provide a timely contribution to the current discourse on housing affordability policies. While tax policy may not directly ease housing costs, through redistribution of wealth governments may still use tax policy to alleviate the affordability problem.

We guide investors in three ethical investment applications by comparing ethically constrained versus unconstrained optimal portfolio methods that force well-behaved weights. With optimal readjustment upon constrained investing, in Sharpe ratio analysis, we find no evidence of a performance cost for sin-free, carbon-free, or Shariah portfolios even though, in the most exacting case, Shariah investing excludes roughly 65% of common shares from security selection. In each case, we identify the specific portfolio adjustments needed to prevent an ethical portfolio performance cost.