The Skewness of the Price Change Distribution: A New Touchstone for Sticky Price Models

We present a new way of empirically evaluating various sticky price models that are used to assess the degree of monetary nonneutrality. While menu cost models uniformly predict that price change skewness and dispersion fall with inflation, in the Calvo model, both rise. However, the U.S. Consumer Price Index (CPI) data from the late 1970s onward show that skewness does not fall with inflation, while dispersion does. We present a random menu cost model that, with a menu cost distribution that has a strong Calvo flavor, can match the empirical patterns. The model exhibits much more monetary nonneutrality than existing menu cost models.     

Measuring Institutional Investors’ Skill at Making Private Equity Investments

Using a large sample of institutional investors’ investments in private equity funds raised between 1991 and 2011, we estimate the extent to which investors’ skill affects their returns. Bootstrap analyses show that the variance of actual performance is higher than would be expected by chance, suggesting that some investors consistently outperform. Extending the Bayesian approach of Korteweg and Sorensen, we estimate that a one‐standard‐deviation increase in skill leads to an increase in annual returns of between one and two percentage points. These results are stronger in the earlier part of the sample period and for venture funds.     

Are Analysts’ Recommendations Informative? Intraday Evidence on the Impact of Time Stamp Delays

We demonstrate that time stamps reported in I/B/E/S for analysts’ recommendations released during trading hours are systematically delayed. Using newswire‐reported time stamps, we find 30‐minute returns of 1.83% (?2.10%) for upgrades (downgrades), but for this subset of recommendations we find corresponding returns of ?0.07% (?0.09%) using I/B/E/S‐reported time stamps. We also examine the information content of recommendations relative to management guidance and earnings announcements. Our evidence suggests that analysts’ recommendations are the most important information disclosure channel examined.     

Mortgage Lending,Default, and the Community Reinvestment Act

The Community Reinvestment Act (CRA) encourages banks to lend to low- and moderate-income individuals. This paper estimates the effect of the CRA on mortgage lending, exploiting variation in the set of banks whose lending performance is assessed in a given neighborhood due to redefinitions of Metropolitan Statistical Areas in 2003. Incorporating a typical tract into one additional banks' assessment area increased mortgage lending there by approximately 2%. Lending to low-income borrowers was particularly affected. While income-conditional default risk was little changed, CRA-induced loans were riskier than average, due to their borrowers' lower incomes.     

Consumption,Credit, and the Missing Young

There are more young adults today with either no credit history or insufficient credit history to be scored by one of the major credit bureaus than there were before the Great Recession—a reality that is likely an outcome of the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009–10. In regressions that include a rich set of controls, we show that measures of young adults missing a credit score in credit bureau data act as a drag on state-level consumption growth. We demonstrate that this effect is driven by young people's loss of access to credit since the legislation went into effect.     

Household Liquidity Constraints and Labor Market Outcomes: Evidence from a Danish Mortgage Reform

We study the causal effect of liquidity constraints on individual labor market outcomes by exploiting the 1992 mortgage reform in Denmark, which for the first time allowed homeowners to borrow against housing equity for nonhousing purposes. Following the reform, liquidity-constrained homeowners increased debt levels and had higher earnings growth and lower employment rates. The option to borrow against housing equity enabled liquidity-constrained individuals to move to high-wage jobs and invest in valuable human and physical capital. The results imply that relaxing household liquidity constraints during recessions can create better job matches, potentially increasing earnings and output in the longer run.     

Monetary Stimulus amidst the Infrastructure Investment Spree: Evidence from China's Loan-Level Data

We study how a fiscal expansion via infrastructure investment influences the dynamic impacts of monetary stimulus on credit allocation. We develop a two-stage approach and apply it to the Chinese economy with a confidential loan-level data set that covers all sectors. We find that infrastructure investment significantly weakened monetary policy's transmission to credit allocated to private firms, while reinforcing the monetary effects on loans to state-owned firms. This fiscal-monetary interaction channel is key to understanding the preferential credit access enjoyed by state-owned firms during the stimulus period. Consequently, monetary stimulus crowded out private investment and decreased capital allocation efficiency.