Business Analytics

Algorithms have increasingly replaced stock traders over the past few decades, but a new University at Buffalo School of Management study has found that market quality decreases when humans are removed from the equation.

Published in the Journal of Finance, the study analyzed how the New York Stock Exchange was affected after floor trading was suspended in 2020 due to the COVID-19 pandemic. Of the 13 registered exchanges in the U.S., only the NYSE continues to use human floor traders — the rest are 100% electronic.

“The closure of the NYSE trading floor due to COVID led to worse market quality across a variety of measures, including liquidity, price efficiency and auction quality,” says study co-author Dominik Roesch, PhD, associate professor of finance.

Early, enhanced information provided by a 10-K (an annual report required by the SEC about a company’s financial picture) helps investors with risk management, according to new research from the University at Buffalo School of Management.

Published in the Journal of Accounting and Public Policy, the study examines the impact of the risk factor disclosures the Securities and Exchange Commission (SEC) has required since 2005 — and whether those disclosures lessen the chance a firm will experience a large decline in stock returns.

“This research supports the SEC and other regulatory agencies’ drive to increase disclosure. Enhanced disclosure can improve a firm’s information environment, leading to better outcomes for firms and market participants alike,” says study co-author Szu-Yin “Jennifer” Wu, clinical assistant professor of finance.

Increased investment in information technology doesn’t necessarily improve a nation’s economic performance — raising questions about the effectiveness of IT spending — according to new University at Buffalo School of Management research.

Published in Asia Pacific Management review, the study analyzed how IT, along with unemployment and inflation rates, affect a country’s performance and found that the productivity paradox (a slowdown in productivity growth that occurred in the 70s and 80s despite rapid IT development) remains in some developed countries.

“While increased IT spending doesn’t always increase productivity, IT investment can pay off when countries leverage available complementary resources, such as e-commerce, traditional capital and traditional labor,” says the study’s lead author Winston Lin, professor of operations management and strategy.

Accounting standards don’t properly reflect the difference between losses driven by investments and actual business performance shortfalls, according to new University at Buffalo School of Management research.

Published in the Review of Accounting Studies, the study found that Generally Accepted Accounting Principles (GAAP) mask the true value of companies by marking investments in intangibles like technology, brands and human capital as losses.

“This is just another indication of how broken accounting is. We need to treat intangible investments as real economic assets,” says study co-author Feng Gu, chair and professor of accounting and law.

The exploding popularity of programs like ChatGPT has organizations looking closely at how artificial intelligence can be adopted in the workplace, and new University at Buffalo School of Management research reveals that getting employees to use AI depends on two factors: employee attitudes toward the technology and the degree to which they can choose to work with it.