{"title":"Optimizing Assemble-to-Order Systems: Decomposition Heuristics and Scalable Algorithms","authors":"Shuyu Chen, Lijian Lu, Jing-Sheng Song, Hanqin Zhang","doi":"10.2139/ssrn.3907189","DOIUrl":"https://doi.org/10.2139/ssrn.3907189","url":null,"abstract":"We consider continuous-review assemble-to-order (ATO) systems with a general bill of materials (BOM) and general leadtimes. ATO systems have the advantage of mass customization and are widely adopted in practice. However, characterizing the optimal inventory policy is notoriously challenging and computational intractable, especially in large-scale systems. We propose effective and computational scalable heuristics through asymptotics, sample-path, linear programming and primal-dual analyses. First, we characterize the asymptotically optimal policy for the M-system. The policy consists of a periodic review priority (PRP) allocation rule and a coordinated base-stock (CBS) replenishment policy. We then construct heuristic policies using insights from the asymptotically optimal policy. In particular, we adopt the PRP allocation rule and develop a decomposition approach for inventory replenishment. This approach decomposes a general system into assembly subsystems and a linear program is constructed to compute policy parameters. However, both the CBS and the assembly decomposition approach are limited to simple systems. We then consider a second approach, which decomposes a system into distribution subsystems and each subsystem has a straightforward solution, which is similar to the newsvendor problem. We use the primal-dual analysis to show that the expected cost under the optimal independent base-stock policy in a general system could be bounded by two newsvendor systems with properly set parameters. Finally, we examine the effectiveness and scalability of these two decomposition approaches in numerical tests. We find that the assembly decomposition is very effective but computationally expensive and thus only good for small-scale systems; the distribution decomposition performs as effective as the optimal independent base-stock (IBS) policy, but is highly scalable for large-scale systems. Numerical tests also provide some interesting insights on the impact of system parameters on the value of past demand information.","PeriodicalId":275866,"journal":{"name":"HKUST Business School Research Paper Series","volume":"227 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-08-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123894675","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Jumps and Diffusive Variance: A Granular Analysis of Individual Stock Returns","authors":"Gang Li, Ruicong Li, Chu Zhang","doi":"10.2139/ssrn.3833680","DOIUrl":"https://doi.org/10.2139/ssrn.3833680","url":null,"abstract":"Jumps and diffusive changes in stock prices are different ways in which information is reflected in the prices. We use nonparametric methods to decompose returns on individual stocks into jumps and diffusive components. Contrary to the conventional assumption that jump intensity is positively related to diffusive variance, we find abundant evidence that realized jump intensity and diffusive variance are uncorrelated or negatively related for a majority of stocks. The jump-diffusion beta is found to positively contribute to the implied volatility smile of options on individual stocks. We also document a counter-cyclical pattern of realized jump sizes, which challenges the i.i.d. jump size assumption commonly seen in the literature. The findings provide useful guidance on modeling option prices.","PeriodicalId":275866,"journal":{"name":"HKUST Business School Research Paper Series","volume":"260 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-04-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123468920","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The Economic Consequences of Firms’ Commitment to ESG Policies","authors":"Dan Amiram, Ilanit Gavious, Chao Jin, Xinlei Li","doi":"10.2139/ssrn.3838462","DOIUrl":"https://doi.org/10.2139/ssrn.3838462","url":null,"abstract":"The largest U.S. banks have adopted, in a staggered manner, an environmental and social risk management framework. Based on a large sample of borrowers, utilizing a staggered difference-in-differences design, we document a significant increase in environmental protection provisions in the loan contract for borrowers that borrow from banks that adopted the framework. Moreover, we reveal a significant reduction in loan spreads, especially among borrowers who borrow from early EP adopters and borrowers who actively switch to banks that adopted the framework. Additionally, the cost of equity decreases for borrowers from banks that adopted the framework. Lastly, we document an increase in environmental performance for these borrowers after the contract. Taken together, our findings are consistent with firms being able to reduce their cost of capital by opting to commit to environmental protection through loan contracts.","PeriodicalId":275866,"journal":{"name":"HKUST Business School Research Paper Series","volume":"19 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-02-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121027369","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The Limit of Targeting in Networks","authors":"Jian Li, Junjie Zhou, Ying‐ju Chen","doi":"10.2139/ssrn.3776944","DOIUrl":"https://doi.org/10.2139/ssrn.3776944","url":null,"abstract":"Network-based targeting is valuable in many applications such as diffusion of new technology, product promotion in marketing, among others. Nevertheless, how to quantitatively measure the effectiveness of targeting strategies remains a challenge. This paper studies a class of network games with strategic complements, where a designer can choose finite sequences of targeting interventions to maximize the aggregate action.<br><br>We propose an effectiveness index, called emph{relative network synergy equivalent} (RNSE), to measure the effect of such network-based targeting interventions. The main results show that, regardless of the targeting policies, the network structures, a simple and unified upper bound for this index is $sqrt{2}approx 1.414$. Moreover, this upper bound is tight. For specific network structures such as the complete network and the bipartite network, we obtain explicit formulas and sharper bounds for the index. We also provide comparative analysis of this index across different targeting policies and across different underlying network structures.","PeriodicalId":275866,"journal":{"name":"HKUST Business School Research Paper Series","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130073965","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Do Analysts Improve Investment Efficiency?","authors":"Jonathan Brogaard, Wei Shi, K. Wei, Haifeng You","doi":"10.2139/ssrn.3053491","DOIUrl":"https://doi.org/10.2139/ssrn.3053491","url":null,"abstract":"To maximize firm value managers must efficiently invest new capital. This paper examines whether analyst coverage impacts a firm’s investment efficiency. Using broker mergers and closures as exogenous shocks to the number of analysts covering a firm we find that firm investment efficiency significantly decreases after losing an analyst. The impact is largest for firms with the fewest number of analysts. We find evidence that the effect is driven by the role analysts play in information acquisition and in price efficiency. The results suggest that the recent decline in analyst coverage may negatively impact resource allocation and future firm performance.","PeriodicalId":275866,"journal":{"name":"HKUST Business School Research Paper Series","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130760281","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The Emergence of Compositional Grammars in Artificial Codes","authors":"Fuhai Hong, Wooyoung Lim, Xiaojian Zhao","doi":"10.2139/ssrn.2828763","DOIUrl":"https://doi.org/10.2139/ssrn.2828763","url":null,"abstract":"Abstract This paper experimentally explores how compositional grammars in artificial codes emerge and are sustained. In a communication game with no conflict of interest, the sender sends a message that is an arbitrary string from available symbols with no prior meaning to indicate an abstract geometrical figure to the receiver. We find strong evidence from the laboratory for the emergence of compositional grammars in the subjects' common codes that facilitate learning efficiency. Moreover, when there is a scarcity of symbols in the repertoire, a few groups in our experiments developed languages with positional compositionality, meaning the same symbol has different interpretations depending on its position in a string, whereas some other groups developed language structures that are not compositional but still efficient in communication.","PeriodicalId":275866,"journal":{"name":"HKUST Business School Research Paper Series","volume":"47 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-08-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122660147","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Structure in Gold and Silver Spread Fluctuations","authors":"J. Batten, Cetin Ciner, B. Lucey","doi":"10.2139/ssrn.1015418","DOIUrl":"https://doi.org/10.2139/ssrn.1015418","url":null,"abstract":"We investigate the price spread between gold and silver trading as a futures contract on COMEX. Although the correlation between gold and silver returns during this period was high we find evidence of time varying long term dependence in the spread, with the positive dependent relationship dominant. This last finding suggests limited opportunity to profit from strategies based on mean reversion of the spread.","PeriodicalId":275866,"journal":{"name":"HKUST Business School Research Paper Series","volume":"28 3","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2007-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131437596","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Option Backdating and Board Interlocks","authors":"John M. Bizjak, M. Lemmon, Ryan J. Whitby","doi":"10.2139/ssrn.946787","DOIUrl":"https://doi.org/10.2139/ssrn.946787","url":null,"abstract":"We examine the role of board connections in explaining how the controversial practice of backdating employee stock options spread to a large number of firms across a wide range of industries. The increase in the likelihood that a firm begins to backdate stock options that can be explained by having a board member who is interlocked to a previously identified backdating firm is approximately one-third of the unconditional probability of backdating in our sample. Our analysis provides new insight into how boards function and the role that they play in providing managerial oversight and determining corporate strategy. The Author 2009. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oxfordjournals.org., Oxford University Press.","PeriodicalId":275866,"journal":{"name":"HKUST Business School Research Paper Series","volume":"23 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2007-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115781320","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Segment Profitability, Misvaluation, and Corporate Divestment","authors":"Peter F. Chen, Guochang Zhang","doi":"10.2139/ssrn.923109","DOIUrl":"https://doi.org/10.2139/ssrn.923109","url":null,"abstract":"This paper develops a theoretical model to explain corporate divestment in the context of accounting‐based valuation and provides empirical evidence to support the model's predictions. Building on Zhang's (2000) real‐options‐based equity value model, we develop a model to explain why firms with multiple business segments may have incentives in financial reporting to shift earnings from one segment to another to influence market valuation. Cross‐segment earnings shifting, however, causes information asymmetry about segmental performance, which leads to market misvaluation. Divestment arises as a voluntary commitment by (some) firms to not engage in segmental earnings manipulation, with the aim of restoring valuation accuracy. Our theoretical analysis yields a number of testable implications. Consistent with our model's predictions, we find empirically that (1) divestment is preceded by an increased divergence in profitability between the divested and continuing segments of the divesting firm, (2) there are...","PeriodicalId":275866,"journal":{"name":"HKUST Business School Research Paper Series","volume":"9 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133527439","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Externalities and Corporate Investment","authors":"Evrim Akdoğu, Peter Mackay","doi":"10.2139/ssrn.887220","DOIUrl":"https://doi.org/10.2139/ssrn.887220","url":null,"abstract":"We show that investment patterns often associated with agency and information problems can emerge as rational responses to product-market rivalry. We establish this result using simultaneous and sequential models of innovative investment that balance two negative externalities. One externality arises when all competing firms invest, thus eroding the gains to innovation accruing to any one firm. Another externality arises when some firms do not invest and lose out to rivals who do innovate. The value of innovative investment therefore depends on the innovation's intrinsic value to each firm and the actions of all competitors. Our analysis can rationalize investment patterns that might appear suboptimal when these externalities are ignored. For instance, our simultaneous model can justify investment levels that might otherwise be interpreted as under or over-investment. Our sequential model shows that value-maximizing firms might optimally herd in their investment decisions. We present evidence supporting key aspects of both the simultaneous and sequential models.","PeriodicalId":275866,"journal":{"name":"HKUST Business School Research Paper Series","volume":"81 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-03-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124115524","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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