The Pre-Pacioli Indian Double-entry System of Bookkeeping: A Comment

The claims made by Lall Nigam that the Bahi-khata was a double-entry system of accounting that predated Pacioli are challenged. Evidence purporting to support Nigam's claims is dismissed as hearsay.     

Quantitative Easing in the 1930s

During the 1934–39 recovery from the U.S. Great Depression, overnight interest rates were usually at a lower bound. Meanwhile, American monetary authorities followed policies related to today's debates on quantitative easing: they tried to stabilize yields on Treasury bonds with open market operations; they created rapid growth in high‐powered money; and they allowed transitory factors to affect high‐powered money. Effects of these policies on bond yields reveal a portfolio effect of short‐duration asset supply on term premiums. This portfolio effect helps explain why high‐powered money growth was associated with recovery of real activity over 1934–39.     

Competing for Attention: Lobbying Time‐Constrained Politicians

We develop a model of lobbying in which a time and resource constrained policymaker first chooses which policy proposals to learn about, before choosing which to implement. The policymaker reviews the proposals of the interest groups who provide the highest contributions. We study how policy outcomes and contributions depend on policymaker constraints and the design of the “Contest for Attention.” Among other results, awarding attention to the highest contributors generally guarantees the first best policy outcome. It can also lead to the highest possible contributions, suggesting that a policymaker may not need to sacrifice policy in order to maximize contributions. Our results also give insight into other settings where agents compete for a decision maker's attention.     

Book Reviews

Companion to Contemporary Economic Thought by DAVID GREENAWAY, MICHAEL BLEANEY and IAN M.T. STEWART (eds.), (London, New York: Routledge, 1991, pp xii and 858, ISBN 0 415 02612 1. International Adjustment and Financing. the Lessons of 1985–1991 by C. FRED BERGSTEN, (ed.), (Washington: Institute for International Economics, 1992), pp xiii and 335, US $34.95 hardback, US $24.95 softback, ISBN 0 88132 142 7 and 0 88132 112 5. Financial Instability and the International Debt Problem by GEORGE MCKENZIE and STEPHEN THOMAS (Basingstoke: Macmillan, 1992), pp ix and 211, $40 hardback, ISBN 0 333 46419 2. Down in The Dumps, Administration of the Unfair Trade Laws by RICHARD BOLTUCK and ROBERT E. LIT AN (eds.), (Washington, DC: The Brookings Institution, 1991). pp xii and 350, US $34.95 hardback, US $15.94 softback, ISBN 0 8157 1020 8, 0 8157 1019 4. Industrial Reform in Socialist Countries, From Restructuring to Revolution by IAN JEFFRIES (Aldershot: Edward Elgar Publishing Ltd., 1992), pp x and 294, $45.00 hardback, ISBN 1 85278 380 X.     

Long‐Run Stockholder Consumption Risk and Asset Returns

We provide new evidence on the success of long‐run risks in asset pricing by focusing on the risks borne by stockholders. Exploiting microlevel household consumption data, we show that long‐run stockholder consumption risk better captures cross‐sectional variation in average asset returns than aggregate or nonstockholder consumption risk, and implies more plausible risk aversion estimates. We find that risk aversion around 10 can match observed risk premia for the wealthiest stockholders across sets of test assets that include the 25 Fama and French portfolios, the market portfolio, bond portfolios, and the entire cross‐section of stocks.     

Option Momentum

This paper investigates the performance of option investments across different stocks by computing monthly returns on at-the-money straddles on individual equities. We find that options with high historical returns continue to significantly outperform options with low historical returns over horizons ranging from 6 to 36 months. This phenomenon is robust to including out-of-the-money options or delta-hedging the returns. Unlike stock momentum, option return continuation is not followed by long-run reversal. Significant returns remain after factor risk adjustment and after controlling for implied volatility and other characteristics. Across stocks, trading costs are unrelated to the magnitude of momentum profits.     

Stealth Acquisitions and Product Market Competition

We examine whether and how firms structure their merger and acquisition deals to avoid antitrust scrutiny. There are approximately 40% more mergers and acquisitions (M&As) than expected just below deal value thresholds that trigger antitrust review. These “stealth acquisitions” tend to involve financial and governance contract terms that afford greater scope for negotiating and assigning lower deal values. We also show that the equity values, gross margins, and product prices of acquiring firms and their competitors increase following such acquisitions. Our results suggest that acquirers manipulate M&As to avoid antitrust scrutiny, thereby benefiting their own shareholders but potentially harming other corporate stakeholders.