Conference Agenda

How should investors value firms without return histories? In standard valuation practice, discounted cash flow models require a firm-specific cost of equity, yet this cannot be estimated when trading data are missing. Investors therefore rely on public peer-based betas as coarse proxies for systematic risk, introducing valuation errors whenever firm-specific exposures differ from peer norms. Using IPOs as a natural laboratory, I show that textual risk disclosures can substitute for missing return data. I develop Aggregated Cluster Embeddings (ACE), which convert qualitative risk narratives into structured firm-level representations. Disclosure-based betas reduce market beta prediction errors by up to 27 percent relative to peer-based betas. However, investors underweight this information at issuance, and firms whose disclosures imply lower risk than their industry peers are initially undervalued, yielding monthly six-factor alphas of 97 basis points. These excess returns fade as return histories accumulate, consistent with markets gradually learning firm-specific covariances. The results highlight a mechanism of information substitution and investor inattention in pricing firms without trading histories.

Measuring the welfare impact of new product introductions is a long-standing challenge for economists. In this study, we make progress on this problem by leveraging the informational efficiency of equity markets and a scalable consumer demand model. We construct a novel database of new product announcements covering 20 years (2002-2021) and use stock market reactions to estimate the profits that these new products generate for the inventor firms. We then use the network oligopoly model of Pellegrino (2025) to measure the change in competitors’ profits and consumer surplus induced by the new products, thus obtaining the dollar welfare generated. We find that: 1) new products introduced by U.S. publicly-traded firms generate substantial welfare gains, between 1 and 2.3% of US GDP per year; 2) a minority of the announcements account for most of the gains; 3) producer surplus accounts for roughly 40% of these gains. This latter figure is significantly higher than for existing products: we show that this is due to the fact that new product creation is concentrated among firms that have a high degree of market power.