Finance Seminar with Scott R. Baker, Kellogg School of Management
The Department of Finance is proud to announce the upcoming online seminar with Scott R. Baker, Kellogg School of Management.
Scott R. Baker will present:
Measuring Customer Churn and Interconnectedness
Can an household-level financial transaction data yield new insights about firm-specific risk? Using an increasingly accessible class of household financial transaction data, we show we can construct accurate pictures of firm revenue, growth, geographic dispersion, and customer base characteristics. We then develop, and make public, two new measures characterizing firms’ customer bases – the rate of churn in a firm’s customer base and the pairwise similarity between firms’ customer bases. While these measures of customer bases are impossible to construct utilizing traditional sources of firm data, we show that they provide important insights into the behavior of both real firm decisions and firm asset prices. Rates of customer churn affect the level and volatility of firm-level investment, markups, and profits. Churn also affects how quickly firms respond to shocks in the value of their growth options (i.e. Tobin’s Q). Similarity between firms’ customer bases highlights one under-explored type of predictability among stock returns – we demonstrate that significant alpha can be generated using a trading strategy that exploits our index of customer base similarity across firms.
Location and sign up:
This is an online seminar on Zoom.
Please contact us in order to sign up.