Delayed Reaction to Good News and the Cross-Autocorrelation of Portfolio Returns

We document a directional asymmetry in the small stock concurrent and lagged response to large stock movements. When returns on large stocks are negative, the concurrent beta for small stocks is high, but the lagged beta is insignificant. When returns on large stocks are positive, small stocks have small concurrent betas and very significant lagged betas. That is, the cross-autocorrelation puzzle documented by Lo and MacKinlay (1990a) is associated with a slow response by some small stocks to good, but not to bad, common news. Time series portfolio tests and cross-sectional tests of the delay for individual securities suggest that existing explanations of the cross-autocorrelation puzzle based on data mismeasurement, minor market imperfections, or time-varying risk premiums fail to capture the directional asymmetry in the data.     

Microeconomics After Keynes: Post Keynesian Economics and Public Policy

Post Keynesian economics has mainly focused on macroeconomic issues and ignored microeconomic policy issues. This paper begins to remedy this gap. It outlines the main principles of the Post Keynesian approach, distinguishes them from neoclassical economics, explains how these principles can be applied to microeconomic issues, and then draws out some policy implications that differ markedly from neoclassical theory on the issues of health care and productivity growth.     

CONTRACTING FOR GOVERNMENT SERVICES: THEORY AND EVIDENCE FROM U.S. CITIES*

Local governments can provide services with their own employees or by contracting with private or public sector providers. We develop a model of this ‘make‐or‐buy’ choice that highlights the trade‐off between productive efficiency and the costs of contract administration. We construct a dataset of service provision choices by U.S. cities and identify a range of service and city characteristics as significant determinants of contracting decisions. Our analysis suggests an important role for economic efficiency concerns, as well as politics, in contracting for government services.     

POWER SUPPLY EXPANSION AND THE NUCLEAR OPTION IN POLAND

This paper describes the construction of a data set of the Polish power sector for use with the Elfin capacity expansion planning model. Using Elfin, the paper derives four scenarios and some sensitivities for new generating capacity construction plans. These scenarios simulate choices among several generic generating technologies made to achieve the lowest overall net present cost of operating the power system through 2015. Key results include: (i) single-cycle natural gas-fired combustion turbines prove highly attractive for Poland because of its urgent need for peaking capacity, (ii) nuclear power cannot be excluded from consideration for Poland on economic grounds alone, (iii) the effectiveness of conservation to reduce airborne emissions is limited under scenarios in which nuclear generation is adopted, and (iv) the attractiveness of nuclear is shown to be highly sensitive to assumptions on some uncertain inputs, suggesting the need for a more detailed analysis before policy implications can be drawn.     

Consumer Awareness of the Legal Obligations of Funeral Providers

The results from a consumer survey that examined consumer knowledge of some parameters of the Funeral Rule are presented. Currently, all funeral home activities are regulated under the Funeral Industry Practices Rule of the Federal Trade Commission. The rule is premised on the assumption that it is difficult for consumers to make careful, informed purchase decisions in at‐need situations because of emotional stress, time pressure, and lack of familiarity with available goods and services. However, limited research has assessed how much consumers know about the legal obligations of funeral providers as provided for by the Funeral Rule. Implications for consumer protection and policy are discussed.