Objective estimation versus subjective perceptions of earnings patterns and post‐earnings‐announcement drift

We investigate how the market's subjective estimates of autocorrelation in quarterly earnings vary with objective time‐series estimates. Our results suggest that investors increasingly underestimate the correlation as the autocorrelation level increases, and as a result, the post‐earnings‐announcement drift (PEAD) increases with the level of autocorrelation. We further show that the ability of autocorrelation to explain variation in the PEAD is robust to alternative explanations based on risk and institutional factors. Additional analysis indicates that the market's inefficiency in assessing the existence and magnitude of autocorrelation (and the related impact on PEAD) is inversely related to the richness of the information environment.     

The Installed Base Effect: Some Empirical Evidence From The Microcomputer Market

The penetration rate US network technologies is not only determined by the indigenous qualities of these technologies, but also by the adoption behaviour of other actors using the same network technology. This paper provides empirical evidence for the importance of network externalities and suggests that the econonmic consequences of network externalities - as they affect the diffusion speed of network technologies at an aggregate level - may be considerable.When the market offers incompatible network technologies, the relative share of previous adopters of the technologies plays a critical role in determining the diffusion speed of network technologies. This paper provides empirical evidence from the European microcomputer market between 1985 and 1994 which supports this hypothesis. Our analysis suggests that the diffusion speed of microcomputers at an aggregate level has varied with the relative order of magnitude of the network size of the two incompatible operating systems: a higher variation between the number of users of different microcomputers sold is positively relaled to a higher diffusion speed of microcomputers in general.     

Terrorist threats,information disclosures,and consumer sovereignty

This paper proposes the use of consumers’ preferences in formulating policies for keeping secret information about terrorist activities and threats that might compromise future security. We report the results from two surveys indicating that support for government secrecy varies across situations depending on the threat and context. A majority of respondents preferred full disclosure of some information related to terrorist threats regardless of the consequences for specific industries or future threats, in particular threats involving attacks on commercial airlines. However a majority of respondents were willing to allow government authorities to withhold information about the details of threats to the financial system and to buildings if revealing the information might compromise future investigations. While the public generally recognizes the importance of keeping some information secret, a democratically elected government should seek to understand the preferences of its citizens on important policy issues related to public safety and security.     

Another Look at Effects of “Adults-Only” Age Restrictions on Housing Prices

This study reexamines the price effects of age restrictions on housing prices. Our data cover a period when the housing market is taking a steep downturn. We argue that, when housing prices are falling, seniors are more likely to avoid investing in housing for at least two reasons. First, seniors are relatively more sensitive to their immediate equity loss than younger homeowners, mainly due to the limited remaining lifetime over which they can afford to wait; second, age-restriction acts as a luxury good, with seniors not willing to pay for reduction in neighborhood uncertainty, eliminating buyer demand for this segment of the population. If this “larger demand loss” outweighs the positive externality of the reduction in neighborhood uncertainty during the market downturn, we would observe that age-restrictions reduce property values. Using data from Broward County, Florida for the years of 2005–2007, we find a significant discount in residential condominium prices due to age-restrictions. In particular, we find that imposing age-restriction on properties decreases housing prices by 17.9% during the period May 2005 to April 2006, while the discount is worse, 22.7%, during the later period May 2006 to May 2007.     

EFFICIENCY AND BARGAINING POWER IN THE INTERBANK LOAN MARKET

Using detailed transactions‐level data on interbank loans, we examine the efficiency of an overnight interbank lending market and the bargaining power of its participants. Our analysis relies on the equilibrium concept of the core, which imposes a set of no‐arbitrage conditions on trades in the market. For Canada's Large Value Transfer System, we show that although the market is fairly efficient, systemic inefficiency persists throughout our sample. The level of inefficiency matches distinct phases of both the Bank of Canada's operations as well as phases of the 2007–8 financial crisis. We find that bargaining power tilted sharply toward borrowers as the financial crisis progressed and (surprisingly) toward riskier borrowers.     

The Role of Founder and Other Family Participation on US Private Foundation Efficiency

Founders make significant financial contributions in creating US private foundations. Therefore, we hypothesize that founders monitor foundation operations and predict a positive relation between founder participation and foundation efficiency. In contrast, we propose competing hypotheses in examining the relation between other family member participation and foundation efficiency. Other family member participation has the potential to enhance foundation efficiency if founders are able to transfer their philanthropic values to their progeny. However, other family participation also has the potential to diminish foundation efficiency if the founders’ withdrawal leaves their foundations without true principals to monitor managerial actions. We find that both founder and other family participation are positively associated with foundation efficiency. We also provide limited evidence that the positive association between founding family participation and foundation efficiency is transferred to second generation family members, but is not transferred to subsequent generations.     

Labor productivity convergence in the Kansas farm sector: a three-stage procedure using data envelopment analysis and semiparametric regression analysis

This paper employs a three stage procedure to investigate labor productivity growth and convergence in the Kansas farm sector for a balanced panel of 564 farms for the period 1993?C2007. In the first stage, Data Envelopment Analysis is used to compute technical efficiency indices. In the second stage, labor productivity growth is decomposed into components attributable to efficiency change, technical change, and factor intensity. The third stage employs both parametric and semiparametric regression analyses to investigate convergence in labor productivity growth and the contribution of each of the three components to the convergence process. Factor intensity and efficiency change are found to be sources of labor productivity convergence while technical change is found to be a source of divergence. Policies that encourage investment in capital goods may help to mitigate disparities in labor productivity across the farm sector.     

Culture, infrastructure and international health benefits delivery

When selecting a health insurance carrier for international employees, it is advantageous to recognize that valid assumptions made when selecting domestic benefits simply do not apply in the international realm and can lead to costly errors. This article examines some scenarios and cultural anomalies that invalidate commonly accepted domestic health insurance practices. It explores strategies for simplifying benefit design, providing access to quality care abroad, assessing costs, minimizing overseas risks and understanding the cultural impact on health care delivery.