UC San Diego

This dissertation contains three essays exploring the factors influencing investor behavior, worker productivity, and unintended consequences of government policies.

Chapter 1 examines the role of media in equity markets. We exploit exogenous attention shocks generated by the announcements of a financial analyst award --- award winners are featured on the front page of a high-profile financial magazine while analysts just missing the award are not. We find that the award announcement immediately causes higher market reaction to pre-existing stale recommendations from analysts barely winning the award than those by analysts barely missing it. However, the reaction fully reverses in six weeks. Evidence supports the notion that the overreaction is mainly driven by attention trading induced by media exposure of award winners rather than by ability signaling from winning the award. In terms of the longer-term consequences of the award, we find that brokerages assign more resources to awardees; the awardees issue more accurate and less biased earnings forecasts, but only for stocks unaffiliated with the brokerages.

Chapter 2 studies the effects of a non-pecuniary symbolic award on winners, losers, and their peers, using a regression discontinuity design. We identify newly recruited insurance salespeople who barely won a quarterly ``Best Rookie'' award and those who barely missed it in a large insurance company. Our main finding is that barely winners earn less life insurance commission than barely losers in the quarter following the award designation. Interestingly, the performance difference is mainly driven by winners earning less rather than losers' earning more. Several mechanisms, such as signaling, effort reallocation, licensing, and mean reversion are tested and ruled out. One mechanism, which we have empirical support for, is peer sabotage of winners triggered by the award designation. Finally, we examine spillover effects of the award and find no evidence that coworkers of winners and losers perform differently in any measurable aspects after the award.

Chapter 3 examines the effect of Recreational Marijuana Legalization (RML) in Colorado on the illegal marijuana possessions in its neighboring states. I use a difference-in-differences design with distance to Colorado border as treatment intensity. I find that RML in Colorado increases marijuana possession offenses among adult males in counties closer to Colorado border relative to those farther away. These findings add to the heated policy debate by pointing out externalities of RML to other states.