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Financial Technology and its Social Value

Paper Session

Saturday, Jan. 7, 2023 8:00 AM - 10:00 AM (CST)

Sheraton New Orleans, Borgne
Hosted By: American Finance Association
  • Chair: Laura Veldkamp, Columbia University

From Man vs. Machine to Man + Machine: The Art and AI of Stock Analyses

Sean Cao
,
Georgia State University
Wei Jiang
,
Emory University
Junbo Wang
,
Louisiana State University
Baozhong Yang
,
Georgia State University

Abstract

We train an AI analyst that digests corporate disclosures, industry trends, and macroeconomic indicators to the extent it beats most analysts. The advantage in ``Man vs. Machine'' is stronger for humans when a firm is complex with intangible assets, and for AI when information is transparent but voluminous. Analysts catch up with machines over time, especially after target firms are covered by alternative data and their institutions build AI capabilities. AI power and human wisdom are complementary in generating accurate forecasts, portraying a future of "Man + Machine" (instead of human displacement) in financial analyses, and likely other high-skill professions.

Does Finance Benefit Society? A Language Embedding Approach

Manish Jha
,
Georgia State University
Hongyi Liu
,
Washington University-St. Louis
Asaf Manela
,
Washington University-St. Louis

Abstract

We measure popular sentiment toward finance using a computational linguistics approach applied to millions of books published in eight countries over hundreds of years. We document persistent differences in finance sentiment across countries despite ample time-series variation. Books written in the languages of more capitalist countries discuss finance in a more positive context. Finance sentiment declines one year before rather than after financial crises. Positive shocks to finance sentiment lead to greater GDP and credit growth.

The Coming Battle of Digital Currencies

Lin William Cong
,
Cornell University
Simon Mayer
,
University of Chicago

Abstract

We model the dynamic competition among national fiat currencies, cryptocurrencies, and Central Bank Digital Currencies (CBDCs), whereby countries strategically digitize their currency and launch CBDC in response to competition from emerging cryptocurrencies and other currencies. Countries with strong but non-dominant currencies benefit the most from launching CBDC early on. The country with the strongest currency has relatively high incentives to digitize its currency so as to nip cryptocurrency growth in the bud and to counteract competitors' CBDCs. We also study the role of stablecoins in currency competition, as well as the effects of currency competition and cryptocurrencies on financial innovation. Our findings help rationalize recent developments in currency and payment digitization, while providing insights into the battle of currencies and the future of money.

Discussant(s)
Jules van Binsbergen
,
University of Pennsylvania
Paola Sapienza
,
Northwestern University
Zhiguo He
,
University of Chicago
JEL Classifications
  • G0 - General