Reinforcement versus balance response in sequential choice

Psychologists often explore the impact of one act on a subsequent related act. With an eye to the marketing literature, this paper explores two properties of sequential choices that involve the resolution of competing goals. Reinforcement occurs when the goals driving the first choice are made stronger by that choice and result in a congruent subsequent choice. Balance occurs when the first choice satisfies or extinguishes the goals that led to the original decision, producing an incongruent subsequent choice. This review examines a number of psychological frameworks that account for reinforcement or balance responses in sequential choice and identifies theoretically relevant moderating variables that lead to either response.     

Daily short interest,idiosyncratic risk,and stock returns

This paper examines the relation between short selling and returns and the impact of arbitrage costs on short sellers’ behavior. Using daily UK short selling data, we find that stocks with low short interest levels experience significant positive returns on both an equal- and value-weighted basis. Economic theory predicts that short sellers avoid establishing positions in stocks with high idiosyncratic risk. Our results indicate a negative relation between short interest and returns among high idiosyncratic risk stocks and that short selling activity is mostly concentrated in low idiosyncratic risk stocks where it is less costly to arbitrage fundamental risk.     

Competitive Grants and the Funding of Agricultural Research in the United States

Efforts to improve public agricultural research efficiency include calls to increase use of competitive grants. This paper empirically assesses different instruments the USDA uses to fund state-level research. Compared with other instruments, competitive grants focus more on basic research and are concentrated among fewer states. Model results suggest that top-ranked biology and agricultural science programs were strong determinants of states' shares of competitive grants. Other significant factors were agricultural sector size and number of agricultural scientists. USDA-funded state-level research focus did not change significantly because competitive grants comprised only 15% of these funds and other instruments counteracted their influence.     

Rethinking the liquidity puzzle: Application of a new measure of the economic money stock

Historically, attempts to solve the liquidity puzzle focus on narrowly defined monetary aggregates, such as non-borrowed reserves, the monetary base, or M1. Many of these efforts fail to find a short-term negative correlation between interest rates and monetary policy innovations. More recent research uses sophisticated macroeconomic and econometric modeling. However, little research has investigated the role measurement error plays in the liquidity puzzle, since in nearly every case, work investigating the liquidity puzzle has used one of the official monetary aggregates, which have been shown to exhibit significant measurement error. In this paper, we examine the role that measurement error plays in the liquidity puzzle by (i) providing a theoretical framework explaining how the official simple-sum methodology can lead to a liquidity puzzle, and (ii) testing for the liquidity effect by estimating an unrestricted VAR.     

How useful are no-arbitrage restrictions for forecasting the term structure of interest rates?

We develop a general framework for analyzing the usefulness of imposing parameter restrictions on a forecasting model. We propose a measure of the usefulness of the restrictions that depends on the forecaster’s loss function and that could be time varying. We show how to conduct inference about this measure. The application of our methodology to analyzing the usefulness of no-arbitrage restrictions for forecasting the term structure of interest rates reveals that: (1) the restrictions have become less useful over time; (2) when using a statistical measure of accuracy, the restrictions are a useful way to reduce parameter estimation uncertainty, but are dominated by restrictions that do the same without using any theory; (3) when using an economic measure of accuracy, the no-arbitrage restrictions are no longer dominated by atheoretical restrictions, but for this to be true it is important that the restrictions incorporate a time-varying risk premium.     

The Asset Pricing Palette: Cash Flows, Returns and Trading Behavior

Asset pricing is the topic of the 2001 Eastern Finance Association Symposium and the five papers selected for this collection, which are summarized below, span a broad range of subjects that fall under the umbrella of the determinants of market prices. For example, the Schwartz and Moon article that introduces the symposium uses real options methodology to value firms whose cash flows are subject to multiple sources of uncertainty while the Luders and Peisl and Mixon analytical models that close the selections incorporate dual stochastic processes to derive relationships between information flow, trading volume and price volatility that are consistent with empirical evidence. In between, Mishra and O'Brien present new evidence on the important of index and factor selection when estimating the required return on equity and Spahr and Schwebach revisit the issue of time diversification by reintroducing a statistical construct from earlier times. Each of the works included here makes an important contribution to our understanding of the asset pricing process in a distinct area and opens new doors onto avenues for future research.     

Service provision for street-based traders in Pietermaritzburg,KwaZulu-Natal: comparing local findings to lessons drawn from Africa and Asia

South Africa's informal economy absorbs approximately one-quarter of the labour force of 15 million people and is therefore the fastest growing sector of employment. Street-based trading constitutes a major subsector within the informal economy and is continuously expanding through unrelenting proliferation of survivalist micro-enterprises. However, few organisations that support enterprises are accessible or appropriate to survivalist and informal sector micro-enterprises. Interviews were conducted with 98 Pietermaritzburg street-based traders and ten KwaZulu-Natal service providers to determine service provision requirements. The results are compared with findings of four international studies. The findings suggest that for survivalist enterprises to benefit from entrepreneurial education and training services, obstacles with regard to South African traders' understanding of entrepreneurship and cultural limitations to enterprise growth should be overcome. Service institutions also require incentives to serve the informal sector, as well as the capacity to design and deliver appropriate services.     

The President Versus the Senate: Appointments in the American System of Separated Powers and the Federal Reserve

For politicians, appointments are an instrument of policy influence.By installing their representatives in an institution, politicianscan count on policy influence for the duration of their appointees'terms. Given the stakes, the occasional controversy regardingnominees is understandable. On the whole, however, nominationsare not controversial; in fact, Senate confirmation votes areoften unanimous. Nevertheless, the Senate can have substantialinfluence in the appointment process. Using a formal model,this article examines how the president and Senate strategicallybargain with one another within the confines of the FederalReserve appointment process to influence monetary policy. Witha new way to estimate monetary policy preferences, this articleshows empirically that policy influence occurs via appointments.