A common method of calculating economic magnitudes is to multiply the regression coefficient of the variable of interest by its sample standard deviation. This method is often problematic in finance settings when researchers use granular fixed effects. We show that in many recently published finance papers and for many common finance variables, the sample standard deviation is much larger than the within-group variation that identifies the regression coefficient, and that within-group changes of this magnitude are rare. Without additional assumptions, this common approach can significantly inflate the economic magnitude of the identified effect and impact the comparison of effects among different variables of interest. We recommend using within-group measures of variation to improve the interpretation of economic magnitudes in this setting.
common method of calculating economic magnitudes is to multiply the regression coefficient of the variable of interest by its sample standard deviation. This method is often problematic in finance settings when researchers use granular fixed effects. We show that in many recently published finance papers and for many common finance variables, the sample standard devi- ation is much larger than the within-group variation that identifies the regression coefficient, and that within-group changes of this magnitude are rare. Without additional assumptions, this common approach can significantly inflate the economic magnitude of the identified effect and impact the comparison of effects among different variables of interest. We recommend using within-group measures of variation to improve the interpretation of economic magnitudes in this setting.
Jansen, Mark & Winegar, Adam Walter (2024)
Nonpecuniary Benefits: Evidence from the Location of Private Company Sales
This paper investigates whether acquisition prices reflect a specific set of nonpecuniary benefits preferred by entrepreneurs: the quality of life (QOL) associated with the business location. Using data on private firm acquisitions, we find that target firms in high-QOL cities sell for a 14% to 20% premium. Traditional financial factors do not explain this premium, which dissipates when the buyer is unlikely to have preferences for high-QOL locations. Using wage-to-housing cost differentials to decompose local amenities and data on migration patterns, we find that QOL amenities have a greater impact on entrepreneurs’ location decisions relative to wage workers. (JEL G02, G32, G34, J32, L26, R39)
Geelen, Thomas; Hajda, Jakub, Morellec, Erwan & Winegar, Adam Walter (2024)
Capital ages and must eventually be replaced. We propose a theory of financing in which firms borrow to finance investment and deleverage as capital ages to have enough financial slack to finance replacement investments. To achieve these dynamics, firms issue debt with a maturity that matches the useful life of assets and a repayment schedule that reflects the need to free up debt capacity as capital ages. In the model, leverage and debt maturity are negatively related to capital age while debt maturity and the length of debt cycles are positively related to asset life. We provide empirical evidence that strongly supports these predictions.
Winegar, Adam Walter & Jansen, Mark (2018)
Non-pecuniary Benefits: Evidence from the Location of Private Company Sales
[Academic lecture]. 2nd Annual Private Markets Research Conference.
Winegar, Adam Walter (2018)
Adverse Selection, Capital Supply, and Venture Capital Allocation
[Academic lecture]. SFS North American Cavalcade.
Winegar, Adam Walter (2017)
Adverse Selection, Capital Supply, and Venture Capital Allocation
[Academic lecture]. Paris Financial Management Conference.
Winegar, Adam Walter & Anjos, Fernando (2017)
A Signaling Theory of Derivatives-Based Hedging
[Academic lecture]. 15th Paris December Finance Conference.
