Neuroscientists have recently been looking at how childhood socioeconomic status and maltreatment during childhood affects the development of the brain (click here). Amongst other things, low socioeconomic status and childhood maltreatment can result in deficits in working memory, impaired cognition, a smaller hippocampus, and a larger amygdala. The question for social scientists is whether early intervention or government policy can somehow improve things for those from disadvantaged backgrounds.
Daron Acemoglu, Simon Johnson, Amir Kermani, James Kwak and Todd Mitton have written a paper on whether firms connected to Timothy Geithner benefited from these connections. They do so by looking at how stocks of these firms reacted to the announcement that he was a nominee for Treasury Secretary in November 2008. They find that there were large abnormal returns for connected firms. Below is the paper's abstract and the full paper is available here . The announcement of Timothy Geithner as nominee for Treasury Secretary in November 2008 produced a cumulative abnormal return for financial firms with which he had a connection. This return was about 6% after the first full day of trading and about 12% after ten trading days. There were subsequently abnormal negative returns for connected firms when news broke that Geithner's confirmation might be derailed by tax issues. Excess returns for connected firms may reflect the perceived impact of relying on the advice of a small ne...