A note on odds in the cattle futures market

This paper investigates the odds of generating a 100-fold return in the cattle futures market. We employ cattle futures data for the period October 11, 1978, through July 31, 1979, to compute the probability of obtaining such a return. The tests are constructed to give the investor the benefit of the doubt whenever doubt exists. The most conservative finding is that the probability is one in approximately thirty-one trillion. Assuming that the return is made in the most efficient way possible, this probability falls to approximately 1.5×10⁻¹⁶.     

Blocked But Not Tackled: Who Founds New Firms When Rivals Dissolve?

Research summary: This article examines the role of competitive shocks in creating opportunities for new firm foundings. I argue that the sudden dissolution of rival firms may release resources that create opportunities for firm formation, particularly among employees facing impediments to capturing value in their current organizations. Analyzing microdata from the legal services industry, I use unexpected deaths of solo‐practicing attorneys as quasi‐exogenous sources of rival dissolution. Results indicate that these shocks increase the odds of founding by about 30%, with stronger effects among attorneys with weaker social connections or higher competition for promotion. The article thus highlights the role that founders play in reallocating dissolved rivals' resources while demonstrating that founding may be an important outlet for “blocked” employees to capture value from opportunities. Managerial summary: This article finds that the shutdown and dissolution of a rival organization may spur employees to found new firms. As a consequence, managers may find it valuable to pay attention to employees' turnover intentions following the dissolution of a rival. Findings suggest that employees who are having trouble advancing in the firm may be the most likely to found a new organization when a rival dissolves, so managers may want to focus retention efforts on these individuals. To the extent that managers wish to capture customers, employees, and other resources that were formerly attached to a dissolved rival, managers may wish to be aware that they could be in competition with their own employees for these resources and opportunities. Copyright © 2017 John Wiley & Sons, Ltd.     

Measuring stress in money markets: A dynamic factor approach

We extract an index of interest rate spreads from various money market segments to assess the level of funding stress in real time. We find that during the 2007–2009 financial crisis, money markets switched between low and high stress regimes except for brief periods of extreme stress. Transitions to lower stress regimes are typically associated with the non-standard policy measures by the Federal Reserve.     

Super returns to Super Bowl ads?

This paper uses a natural experiment—the Super Bowl—to study the causal effect of advertising on demand for movies. Identification of the causal effect rests on two points: 1) Super Bowl ads are purchased before advertisers know which teams will play; 2) home cities of the teams that are playing will have proportionally more viewers than viewers in other cities. We find that the movies in our sample experience on average incremental opening weekend ticket sales of about $8.4 million from a $3 million Super Bowl advertisement.     

Money,reserves, and the transmission of monetary policy: Does the money multiplier exist?

With the use of non-traditional policy tools, the level of reserve balances has risen in the US from roughly $20 billion before the financial crisis to well past $1 trillion. The effect of reserve balances in macroeconomic models often comes through the money multiplier, affecting the money supply and the bank lending. In this paper, we document that the mechanism does not work through the standard multiplier model or the bank lending channel. If the level of reserve balances is expected to have an impact on the economy, it seems unlikely that a standard multiplier story will explain the effect.     

Consequences of Mutual Ownership for Building Societies

This paper argues that the mutual ownership of building societies entails, in principle, different objectives from those of a company. It considers whether members' interests are best served by maximising either surpluses or growth and reviews evidence on economies of scale and effciency compared with banks. Conversion seems unlikely to result in great improvements in effciency and it is hard to say whether members benefit from free shares by more than they may lose as customers. The case of Abbey National is examined in the light of the reasons it gave for conversion.     

Futures studies in India putting down roots

Since the 1970s the Indian government's Department of Science and Technology has been working to spread futures studies throughout the country's educational institutes, governmental policy-making groups, and corporations. Satish Seth has been involved in this effort from the beginning, and here reports on the progress and achievements to date.     

State lotteries and externalities to their participants

The degree of participation in state lotteries can either increase or decrease expected returns. It is theoretically possible for unfair bets to become more than fair as participation in lotteries changes. In addition, the purchase of every combination of numbers can be more than a fair bet and such a purchase may increase the expected return to other lottery players.     

Strategic Quality Decisions under Heterogeneous Resource Endowments

The literature on product competition advocates a differentiation strategy assuming firm homogeneity in resources. However, firm heterogeneity in resource endowments has long been recognized in economics. Merging these two perspectives, we show that the increase in consumer preference for quality leads to firms' aggressive price competition instead of quality differentiation. As consumers look for higher quality, the cost advantage arising from superior resources increases and makes head-to-head competition more profitable than accommodating a less efficient rival. When consumers are highly concerned about quality, even a small resource difference leads a more efficient firm to initiate cutthroat price competition for market dominance.