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Kenneth Ahern is an Associate Professor at the Marshall School of Business and a Faculty Research Fellow at the National Bureau of Economic Research (NBER). His research is distinguished by the study of networks to study how economic outcomes spread from one agent to another through interactions, including interactions among industries, individuals, and information sharing. His research has been published in leading finance and economics journals including the Quarterly Journal of Economics, Journal of Finance, Journal of Financial Economics, and Review of Economics and Statistics, and has been cited in both the popular press and legislative hearings around the world. Before joining USC, Kenneth was on the faculty of the Ross School of Business at the University of Michigan.
Areas of Expertise
INSIGHT + ANALYSIS
Cited: Ahern and Giacoletti in Reason and the Star Tribune
Research focusing on a landmark Minnesota rent control law by Kenneth Ahern, Associate Professor of Finance and Business Economics, and Marco Giacoletti, Assistant Professor of Finance and Business Economics, is cited by Reason Magazine and the Star Tribune.
RESEARCH + PUBLICATIONS
This paper exploits hand-collected data on illegal insider trades to provide new evidence on the ability of a host of standard measures of illiquidity to detect informed trading. Controlling for unobserved cross-sectional and time-series variation, sampling bias, and strategic timing of insider trades, I find that when information is short-lived, only absolute order imbalance and effective spread are statistically and economically robust predictors of insider trading. However, when information is long-lasting, insiders strategically time their trades to avoid illiquidity and none of the standard measures I consider are reliable predictors, including bid-ask spreads, order imbalance, Kyle's lambda, and Amihud illiquidity.
Terrorist attacks are designed to influence economic growth and individual psychology. However, identifying the direct effect of terrorism on economics and psychology is difficult because institutions also change in response to terrorist attacks. This paper controls for institutional responses to terrorist attacks by studying people who live beyond the institutions' borders, but are exposed to the attacks. I find that terrorism leads to declines in trust, subjective well-being, and the importance of creativity and freedom. However, at the macro-level, terrorism leads to increases in economic output and household income. These results are consistent with a growing literature that finds productive responses to trauma.
This paper exploits a novel hand-collected data set to provide a comprehensive analysis of the social relationships that underlie illegal insider trading networks. I find that inside information flows through strong social ties based on family, friends, and geographic proximity. On average, inside tips originate from corporate executives and reach buy-side investors after three links in the network. Inside traders earn prodigious returns of 35% over 21 days, with more central traders earning greater returns, as information conveyed through social networks improves price efficiency. More broadly, this paper provides some of the only direct evidence of person-to-person communication among investors.
We find strong evidence that three key dimensions of national culture (trust, hierarchy, and individualism) affect merger volume and synergy gains. The volume of cross-border mergers is lower when countries are more culturally distant. In addition, greater cultural distance in trust and individualism leads to lower combined announcement returns. These findings are robust to year and country-level fixed effects, time-varying country-pair and deal-level variables, as well as instrumental variables for cultural differences based on genetic and somatic differences. The results are the first large-scale evidence that cultural differences have substantial impacts on multiple aspects of cross-border mergers.
The media has an incentive to publish sensational news. We study how this incentive affects the accuracy of media coverage in the context of merger rumors. Using a novel dataset, we find that accuracy is predicted by a journalist's experience, specialized education, and industry expertise. Conversely, less accurate stories use ambiguous language and feature well-known firms with broad readership appeal. Investors do not fully account for the predictive power of these characteristics, leading to an initial target price overreaction and a subsequent reversal, consistent with limited attention. Overall, we provide novel evidence on the determinants of media accuracy and its effect on asset prices.