Will Cong (Cornell): AlphaManager A Data-Driven-Robust-Control Approach to Corporate Finance

The webinar is on April 25, 12-1pm Eastern Time (9-10am PT)

Presenter: Will Cong (Cornell University)

Discussant: Wei Jiang (Emory University)

Zoom webinar link: https://stanford.zoom.us/j/97127037215?pwd=ZFVvcHY1TEVtanl3UzB6TzZwZm4zdz09 Webinar ID: 971 2703 7215 Passcode: 401802

AlphaManager: A Data-Driven-Robust-Control Approach to Corporate Finance

Murillo Campello (Cornell), Will Cong (Cornell) and Luofeng Zhou (NYU Stern)

Abstract: Corporate decision-making involves high-dimensional, non-linear stochastic control under managerial learning and dynamic interactions with the economic environment a firm faces. We introduce an AI-assisted, data-driven framework to complement theory, reduced-form models, and structural estimations in corporate finance research, with an emphasis on explaining or predicting firm outcomes empirically, and offering policy recommendations for an arbitrary business objective. We first build a predictive environment module through supervised neural networks, and then add a policy module through deep reinforcement learning that goes beyond hypothesis testing based on observed data tests or simulations. By incorporating model ambiguity and robust control techniques, our framework not only better explains and predicts corporate outcomes in- and out-of-sample, but also identifies important managerial actions while offering effective dynamic policies adaptive to the market evolution. In addition, our proposed framework helps distinguish scenarios where theory and causal identifications are crucial from situations where predictive models trained on historical observations suffice.

Bio of speaker: Lin William Cong is the Rudd Family Professor of Management (endowed faculty chair by the Rudd Family Foundation) and a Tenured Professor of Finance at the Johnson Graduate School of Management at Cornell University SC Johnson College of Business. He is also the founding faculty director for the FinTech Initiative at Cornell, a faculty scientist at the Initiatives for Cryptocurrencies and Contracts (IC3), and a research associate at the National Bureau of Economic Research. Prior to joining Cornell, he was an assistant professor of Finance and Ph.D. advisor at the University of Chicago Booth School of Business and faculty member at the Center for East Asian Studies. He is formerly a Kauffman Junior Faculty Fellow, a Poets & Quants World Best Business School Professor, a 2022 Top Quant Professor, a doctoral fellow at the Stanford Institute for Innovation in Developing Economies, and the George Shultz Scholar at the Stanford Institute for Economic Policy Research. Cong has served as a Finance Editor for the Management Science, and as associate or advisory editors for the Journal of Financial Intermediation, Journal of Portfolio Management, Journal of Corporate Finance, and the Journal of Banking and Finance, among other editorial roles. He is also a member of multiple professional organizations such as the American Economic Association, European Finance Association, and the Econometric Society. Cong researches on financial economics, information economics, FinTech and Economic Data Science, Entrepreneurship, and China. His academic interests include financial innovation, mechanism and information design, blockchains, cryptocurrencies, digital economy, real options, financial policy and markets in China, machine learning, AI for Finance, and alternative data. His recent work has focused on the intersection of technology, data science, and finance. He and his coauthors have developed and introduced goal-oriented search and interpretable AI for finance, foundations of tokenomics (categorization of tokens, cryptocurrency pricing, and optimal token monetary policy design, etc.), industrial organization and system design in blockchains and DeFi, and blockchain analytics and forensics that helps practitioners, investors, and regulators, among others. His research has been featured in top academic journals and media such as Bloomberg, CNN, Forbes, VOX, and Washington Post, and has been recognized with a number of accolades including over 40 conference best paper prizes and competitive grants. He has also been invited to speak and teach at hundreds of world-renowned universities, venture funds, technology firms, investment and trading shops, and government agencies such as IMF, Ant Financial, SEC, and federal reserve banks. Cong earned a Ph.D. in Finance and a MS in Statistics from Stanford University. He obtained his undergraduate degrees in Physics and Mathematics from Harvard University.

Bio of discussant: Wei Jiang is Asa Griggs Candler Professor of Finance and Vice Dean of Faculty and Research at Emory University's Goizueta Business School. She is also a Senior Fellow at the Program on Corporate Governance at Harvard Law School, a Research Associate of the NBER (Law and Economics, and Corporate Finance) and a member of the Committee on Capital Market Regulation. She is currently the President of the Society of Financial Studies (SFS). Professor Jiang's main research interests lie in corporate governance, institutional investors, technology and financial markets. She has published extensively in top economics, finance, and law journals, and her research has been frequently featured in major media, including the Wall Street Journal, Economist, Institutional Investors, Money, Fortune, Business Week, New York Times and Financial Times. She received numerous awards for research excellence, including the Smith-Breeden and DFA Distinguished Paper Prizes from the Journal of Finance, the Michael J. Brennan Best Paper Award from the Review of Financial Studies, and the Jensen Prize from the Journal of Financial Economics, as well as the best paper prizes from the Western Finance Association, Chicago Quantitative Alliance, UK Inquire, the Q-Group, and the IRRC Institute. Previously she served as an editor of the Review of Financial Studies, a Finance Department Editor at Management Science and an Associate Editor at the Journal of Finance. Professor Jiang graduated from Fudan University (China) with B.A. and M.A. in economics. She received her Ph.D. in economics from the University of Chicago in 2001, and joined the Finance faculty of Columbia Business School in the same year. She was the Arthur F. Burns Professor of Free and Competitive Enterprise at Columbia Business School until 2022.