Finance and Accounting Research Seminar - Elisa Pazaj (University of Amsterdam)

Elisa Pazaj is visiting the University of Exeter Business School on Wednesday 4 November, where she'll be presenting her talk Addressing Anticipation Effects in Finance. It's part of the Finance and Accounting research seminar series, so it's a proper academic session rather than a casual chat.

Her talk focuses on anticipation bias—the way people change their decisions before a policy event actually happens, based on what they think the outcome will be. It's a tricky thing to pin down because it means the effect of a policy is often felt before the policy is even in place. Pazaj argues that a lot of standard empirical techniques can't accurately measure a policy's causal effects because they don't account for this kind of forward-looking behaviour. To tackle it, she's developed a new empirical procedure that combines reduced-form and structural estimation to measure and correct for that bias.

She illustrates the whole thing with the Paris Agreement. Her findings show that anticipation led high-emissions firms to cut investment in the year before the agreement was signed. Because of that, she suggests that reduced-form studies of the accord may understate its causal effects on investment by 29% and on stock returns by 22%. It's a clear example of how looking at the data without accounting for anticipation can lead to a pretty significant underestimation of a policy's real impact.

Pazaj comes from the University of Amsterdam, and the seminar is run by the University of Exeter Business School's Finance and Accounting group. It starts at 13:45 in Syndicate Room B.