Analyst Disagreement,Mispricing, and Liquidity*

This paper documents a close link between mispricing and liquidity by investigating stocks with high analyst disagreement. Previous research finds that these stocks tend to be overpriced, but that prices correct downwards as uncertainty about earnings is resolved. Our analysis suggests that one reason mispricing has persisted through the years is that analyst disagreement coincides with high trading costs. We also show that in the cross‐section, the less liquid stocks tend to be more severely overpriced. Additionally, increases in aggregate market liquidity accelerate the convergence of prices to fundamentals. As a result, returns of the initially overpriced stocks are negatively correlated with the time series of innovations in aggregate market liquidity.     

On the Effectiveness of Loan-to-Value Regulation in a Multiconstraint Framework

Models in the infinite horizon macro-housing literature often assume that borrowers are constrained exclusively by the loan-to-value (LTV) ratio. Motivated by the Swedish microdata, I explore an alternative arrangement where borrowers are constrained by a collateral constraint and by a debt-service-to-income ratio. While stricter LTV limits are often considered as a measure to tackle the rise in household indebtedness, I find that policy designed to lower the maximum permissible LTV ratio may actually leave the debt-to-GDP ratio unchanged and increase housing prices in equilibrium if borrowers are bound by two constraints at the same time.     

Propagation Mechanisms for Government Spending Shocks: A Bayesian Comparison

The inability of a simple real business cycle model to predict a rise in consumption in response to increased government expenditures, observed in many empirical studies, has stimulated the development of alternative theories of government spending shocks. Using the Bayesian approach, we evaluate the quantitative performance of five extant models, and find that neither of the considered transmission mechanisms for government spending helps improve the fit of the baseline model. Moreover, we find that consumption decreases in all estimated models in response to a rise in government spending.     

RIGHT ON TARGET: EXPLORING THE FACTORS LEADING TO INFLATION TARGETING ADOPTION

This paper examines which economic, fiscal, external, financial, and institutional characteristics of countries affect the likelihood that they adopt inflation targeting (IT) as their monetary policy strategy. We estimate a panel binary response model for 60 countries and two subsamples consisting of Organization for Economic Cooperation and Development (OECD) and non‐OECD countries over the period 1985–2008. The findings suggest that past macroeconomic performance of a country, its fiscal discipline, exchange rate arrangements, as well as the structure and development of its financial system have a significant impact on the likelihood to adopt IT. However, the factors leading to IT adoption differ significantly between OECD and non‐OECD countries. (JEL E42, E52)     

Heterogeneity Gap in Stable Jurisdiction Structures

This paper examines a model of multijurisdiction formation where individuals' characteristics are uniformly distributed over a finite interval. Every jurisdiction locates a public facility and distributes its cost equally among the residents. We consider the notions of Nash and local Nash stability, and examine the existence and characterization of stable partitions. The main feature of this analysis is that, even under the uniform distribution, there are stable structures that exhibit a high degree of heterogeneity of jurisdictional sizes.     

Stable Assignment of Public Facilities under Congestion

We study the problem of locating multiple public facilities when each member of society has to be assigned to exactly one of these facilities. Individuals' preferences are assumed to be single‐peaked over the interval of possible locations and negatively affected by congestion. We characterize strategy‐proof, efficient, and stable allocation rules when agents have to be partitioned between two groups of users and discuss the normative content of the stability property. Finally we prove that when more than two groups have to be formed, even with common information on the distribution of the peaks, there is no strategy‐proof, efficient, and stable allocation rule.     

Stock Returns over the FOMC Cycle

We document that since 1994, the equity premium is earned entirely in weeks 0, 2, 4, and 6 in Federal Open Market Committee (FOMC) cycle time, that is, even weeks starting from the last FOMC meeting. We causally tie this fact to the Fed by studying intermeeting target changes, Fed funds futures, and internal Board of Governors meetings. The Fed has affected the stock market via unexpectedly accommodating policy, leading to large reductions in the equity premium. Evidence suggests systematic informal communication of Fed officials with the media and financial sector as a channel through which news about monetary policy has reached the market.     

Student evaluation of teaching effectiveness: an unresolved dilemma

Content analysis techniques were used to analyse the criteria used for student evaluation of teaching effectiveness in college and university home economics programmes. Student evaluation forms were obtained from 29 state institutions representing 21 states. The evaluation forms varied in length from seven to 36 objective items. Most provided for flexibility. including such options as add-on items, open-ended response format, and choice of forms. The evaluation criteria fell into six categories: course organization and content, course requirements, evaluation procedures, student participation, teaching skills, and global value of course. All of the institutions included items related to teaching skills. This was also the most heavily weighted factor, accounting for nearly 40% of the total evaluation. This is a significant finding, given that many college and university faculty have limited opportunities to develop teaching skills prior to beginning an academic career. Home economics administrators might use the results of the study to design faculty development programmes to help both novice and experienced faculty acquire or improve the skills on which they are being evaluated.     

Did the 48‐hour week damage Britain's industrial competitiveness?1

Britain's 1919 introduction of a 48‐hour week for industrial workers has been highlighted as a key factor depressing its relative labour productivity. This largely ignores both any potential offset to lower hours from higher hourly productivity and the fact that the 48‐hour week was also introduced in almost all other industrialized nations (generally involving substantially greater reductions in hours). We examine the international context and the short‐term impact on British productivity, focusing on three major export industries—coal, cotton, and iron and steel. Britain did not suffer any significant relative productivity loss in these industries, while reduced working hours are shown to have been partially compensated for by higher hourly productivity.