We summarize the potential impact that the European Union’s new General Data Protection Regulation will have on the routine use of machine learning algorithms. Slated to take effect as law across the EU in 2018, it will restrict automated individual decision-making (that is, algorithms that make decisions based on user-level predictors) which “significantly affect” users. The law will also effectively create a “right to explanation,” whereby a user can ask for an explanation of an algorithmic decision that was made about them. We argue that while this law will pose large challenges for industry, it highlights opportunities for computer scientists to take the lead in designing algorithms and evaluation frameworks which avoid discrimination and enable explanation.

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European Union Regulations on Algorithmic Decision-Making and a “Right to Explanation”

During the 1980s, U.S. firms that announced stock repurchase programs earned favorable long-run returns. Recently, concerns have been raised regarding the robustness of these findings. This comes at a time of explosive worldwide growth in the adoption of repurchase programs. This study provides out-of-sample evidence for 1,060 Canadian repurchase programs announced between 1989 and 1997. As in the U.S., the Canadian stock market seems to discount the information contained in repurchase announcements. Value stocks announcing repurchase programs have particularly favorable returns. Canadian law requires companies to report how many shares they repurchase on a monthly basis. We find that managers are sensitive to mispricing as completion rates are higher in cases where undervaluation may be a more important factor. Moreover, trades are linked to price movements; managers buy more shares when prices fall and reduce their buying when prices rise.

Stock Repurchases in Canada: Performance and Strategic Trading

We summarize the potential impact that the European Union's new General Data Protection Regulation will have on the routine use of machine learning algorithms. Slated to take effect as law across the EU in 2018, it will restrict automated individual decision-making (that is, algorithms that make decisions based on user-level predictors) which "significantly affect" users. The law will also effectively create a "right to explanation," whereby a user can ask for an explanation of an algorithmic decision that was made about them. We argue that while this law will pose large challenges for industry, it highlights opportunities for computer scientists to take the lead in designing algorithms and evaluation frameworks which avoid discrimination and enable explanation.

EU regulations on algorithmic decision-making and a "right to explanation".

We explore the questions of whether and why out-of-state buyers pay more for real estate than their in-state counterparts. Theoretically, we develop a model capable of explaining a premium if out-of-state buyers have high search costs, upwardly biased beliefs about prices or an unusually short time horizon to purchase. Empirically, we find that out-of-state buyers pay a statistically significant and economically meaningful premium for apartment complexes in the Phoenix area. We also find some evidence consistent with the premium being driven by high search costs, biased beliefs (anchoring) and haste associated with out-of-state buyers.

Do Out‐of‐State Buyers Pay More for Real Estate? An Examination of Anchoring‐Induced Bias and Search Costs

This paper develops a political economic explanation of the 2007–9 US subprime crisis which focuses on one of its central causes: the transformation of racial exclusion in US mortgage-markets. Until the early 1990s, racial minorities were systematically excluded from mortgage-finance due to bank-redlining and discrimination. But, then, racial exclusion in credit-markets was transformed: racial minorities were increasingly given access to housing-credit under terms far more adverse than were offered to non-minority borrowers. This paper shows that the emergence of the subprime loan is linked, in turn, to the strategic transformation of banking in the 1980s, and to the unique global circumstances of the US macro-economy. Thus, subprime lending emerged from a combination of the long US history of racial exclusion in credit-markets, the crisis of US banking, and the position of the US within the global economy. From the viewpoint of the capitalist accumulation-process, these loans increased the depth of the financial expropriation of the working class by financial capital. The crisis in subprime lending then emerged when subprime loans with exploitative terms became more widespread and were made increasingly on an under-collateralised basis – that is, when housing-loans became not just extortionary but speculative.

/pdf/racial-exclusion-and-the-political-economy-of-the-subprime-3awweiwo59.pdf

Racial Exclusion and the Political Economy of the Subprime Crisis

Charges that geographical redlining is widely practiced by mortgage lenders and is associated with racial discrimination have received much attention. However, empirical research in this area has yet to document a convincing answer to the question of whether redlining even exists. Much of the previous research in this area has suffered from failure to account for variations in risk, and/or failure to adequately control for geographical differences in demand. This study addresses these problems in an effort to determine whether the disparity in the flow of mortgage credit can be explained by differences in risk and demand. THE U.S. MORTGAGE MARKET is operationally efficient with long-term mortgage loans made to highly leveraged borrowers at very thin spreads above the lender's cost of funds. There has long been controversy, however, with respect to considerations of equity. Legislation on this issue began with the Fair Housing Act of 1968, followed by the Equal Credit Opportunity Act of 1974, and the Home Mortgage Disclosure Act of 1975 (HMDA). It is now over 15 years since passage of the Community Reinvestment Act of 1977 (CRA). This legislation was designed to assure that banks meet the credit needs of neighborhoods in their service areas. In recent years much attention in the administration of the CRA has been devoted to the issue of racial discrimination in mortgage lending. Questions still remain as to whether the decisions of mortgage lenders are influenced by the race of the loan applicant or on the racial composition of his neighborhood. Redlining is the refusal of lenders to make mortgage loans in certain areas regardless of the creditworthiness of the individual loan applicant. Many studies claim to verify the existence of racially based mortgage redlining. The earliest studies were generally carried out by community groups and were rather crudely done. For a summary of such studies, see Benston (1981). Several studies appear in professional literature (for example, see Bradbury, Case, and Dunham (1989) and Hutchinson, Ostas, and Reed (1977)). From a public policy standpoint, these findings, if valid, would indicate a need for additional regulation to ensure social equality. Additionally, the existence of redlining in the absence of structural defects in the market would conflict

Mortgage Redlining: Race, Risk, and Demand

This paper explores the effect of stock repurchase announcements on equity returns for publicly traded real estate investment trusts (REITs). In addition to providing analysis of the corporate decision to repurchase shares, the study of share repurchases in the context of REITs provides a novel opportunity to disentangle the impact of competing theories for the abnormal returns observed around repurchase announcements. Prior literature advances six hypotheses to explain the stock price reaction associated with repurchases. Given that the theories all predict the same stock price reaction, existing studies are unable to disentangle the competing hypotheses. The intent of this research is to extricate the signaling hypothesis from the competing explanations to determine whether the managerial signaling hypothesis is a credible explanation for the abnormal returns observed around share repurchase announcements. After controlling for relevant economic variables, we provide evidence for the efficacy of the managerial signaling hypothesis.

Why Do REITs Repurchase Stock? Extricating the Effect of Managerial Signaling in Open Market Share Repurchase Announcements

This paper explores the effect of stock repurchase announcements on equity returns for publicly traded real estate investment trusts (REITs) In addition to providing analysis of the corporate deci

Many authors have commented on the compliance risk associated with tax-deferred exchanges. However, no published studies explicitly address whether the risks associated with the exchange process impact the price at which exchanged assets trade. Using a unique data set that documents transactions for nondirect exchanges, this study examines the price impact of tax-deferred exchanges on apartment transactions in the Phoenix, Arizona, market. Consistent with the price pressure hypothesis originally developed by Scholes (1972) and Kraus and Stoll (1972) and the tax capitalization hypothesis proposed by Oates (1969), the data show that exchange participants pay an economically significant premium to acquire replacement assets. A conventional hedonic price index is generated to investigate the rational bounds of the exchange premium.

Do Tax-Deferred Exchanges Impact Purchase Price? Evidence from the Phoenix Apartment Market

Many authors have commented on the compliance risk associated with tax-deferred exchanges. However, no published studies explicitly address whether the risks associated with the exchange process impacts the price at which exchanged assets trade. Using a unique data set that separates buy and sell side transactions for non-direct exchanges, this study examines the price impact of tax-deferred exchanges on apartment transactions in the Phoenix, Arizona market. Consistent with the price pressure hypothesis originally developed by Scholes (1972) and Kraus and Stoll (1972), the data show that exchange participants pay an economically significant premium to acquire replacement assets. A conventional hedonic price index is generated to investigate the rational bounds of the exchange premium. While the impact of an exchange is large, the premium is within the rational bounds.

Andrew Holmes

Papers

Mortgage Redlining: Race, Risk, and Demand

Why Do REITs Repurchase Stock? Extricating the Effect of Managerial Signaling in Open Market Share Repurchase Announcements

Why Do REITs Repurchase Stock? Extricating the Effect of Managerial Signaling in Open Market Share Repurchase Announcements

Do Tax-Deferred Exchanges Impact Purchase Price? Evidence from the Phoenix Apartment Market

Do Tax-Deferred Exchanges Impact Purchase Price? Evidence form the Phoenix Apartment Market