Optimal annuitization with imperfect information about insolvency risk

Even the highest‐rated life‐annuity providers have a nonzero probability of becoming insolvent during an annuitant's retirement, and many potential annuitants are unaware of the state guaranty associations (SGAs) which provide insurance against the associated financial consequences. We study the theoretical implications of insolvency risk—real and perceived—for annuitization. Then, using a disciplined calibration of annuitant misperceptions in a standard life cycle model, we show that even the modest perceived risk of default associated with highly‐rated providers can—absent awareness of the SGAs—reduce annuitization and significantly reduce welfare. We further consider the implications of information frictions which prevent retirees from discerning true insolvency risk and we find that these frictions have plausibly large additional quantitative implications for annuitization and welfare. Simulations of our model further suggest that the general lack of awareness of the SGA backstop by potential annuitants can erode a sizable fraction of the potential welfare benefits thereof.     

The evolving relation between dividends and flexible payouts: A different evolution

We study payout by UK listed companies during 1993–2018. Regular dividends remain the dominant channel, but flexible payouts (special dividends and repurchases) have grown, and they make total payout more responsive to earnings. Flexible payouts are used to augment regular dividends: few companies pay out by flexible means only, and tests indicate that they augment rather than replace regular dividends. Comparison with US evidence shows that UK companies make greater use of dividends (including specials) in relation to repurchases, and have a greater willingness to change regular dividend per share.     

Perceived Product Sizes in Visually Complex Environments

Although prior scholarship has demonstrated important effects of visual complexity on product perceptions, the relationship between the visual complexity of a product’s environment and that product’s perceived size remains unexplored. Because size is such an important product characteristic in many consumer contexts, the lack of exploration of this relationship leaves a significant gap in the literature on size perceptions, especially in relation to the retailing domain. The present investigation seeks to document the relationship between environmental visual complexity and the perceived size of a product. Namely, five studies show that high visual complexity decreases consumer size perceptions of a focal product through a serial mediation process in which high complexity pulls consumer attention away from the focal product. This shifted attention decreases processing fluency and leads consumers to perceptually minimize size to avoid information overload in the processing of a display. Even after ruling out potential influences of referent information (study 5) and alternative explanations of affective processing and perceived depth (study 4), these effects hold. The findings have implications for both theory and practice, shedding light on the relationship between size perceptions of a focal object and its environment.     

Understanding Urban Processes in Flint,Michigan: Approaching ‘Subaltern Urbanism’ Inductively

Ananya Roy introduces the concept ‘subaltern urbanism’ in her 2011 article ‘Slumdog Cities: Rethinking Subaltern Urbanism’. She challenges researchers to move beyond existing epistemological and methodological limits, and offers four concepts which, taken together, serve as a useful starting point for understanding and representing subaltern urban space. In this article I argue that instead of a deductive approach that begins with an a priori identification of slums as subaltern urban space, an inductive approach of identifying subaltern urban space would expand the concept and show that subaltern urbanism exists in the global North. I present original research to show that Flint, Michigan, can be considered subaltern urban space. In the final section of the article I argue that this inductive approach to subaltern urbanism can foster comparative research across the North‐South divide, and generate the transfer of knowledge from South to North.     

How long until human-level AI? Results from an expert assessment

The development of human-level AI has been a core goal of the AI field since its inception, though at present it occupies only a fraction of the field's efforts. To help understand the viability of this goal, this article presents an assessment of expert opinions regarding human-level AI research conducted at AGI-09, a conference for this AI specialty. We found that various experts strongly disagree with each other on certain matters, such as timing and ordering of key milestones. However, we did find that most experts expect human-level AI to be reached within upcoming decades, and all experts give at least some chance that some milestones will be reached within this time. Furthermore, a majority of experts surveyed favor an integrative approach to human-level AI rather than an approach centered on a particular technique. Finally, experts are skeptical about the impact of massive research funding, especially if it is concentrated in relatively few approaches. These results suggest that the possibility of achieving human-level AI in the near term should be given serious consideration.     

A MULTIFACTOR ANALYSIS OF COUNTRY FUND RETURNS

Previous closed‐end country fund research concludes that returns behave more like the U.S. market than like their target markets. We argue this finding may be biased by model misspecification and inappropriate estimation techniques. We propose a single‐equation model containing five hypothesized factors of fund returns. We estimate this model for nineteen pooled seasoned funds using a time‐series cross‐section regression that corrects for two types of autocorrelation. We show that returns are strongly related to target markets. Returns are also related to changes in discounts, exchange rates, and other countries' markets, but are only weakly related to the U.S. market. JEL classification: G10, G12     

The cost of bank loans in relation to bonds swapped into a floating rate

Banks never lend at less than the interbank floating rate, LIBOR. We argue that this must be because it is insufficiently profitable for those that could lend at less than LIBOR to do so and discuss circumstances in which this would be the case. Using data from 1988–1991, we show that LIBOR varies in relation to the cost of corporate bonds swapped into a floating rate, and suggest that the relative cost of LIBOR may affect bank and bond market pricing policies. the data also indicates that changes in the compensation for credit risk demanded by the bank and bond markets are not synchronous, and that swap rates have an appreciable impact on the cost of bonds swapped into floating.     

The realized forward term premium in the repo market

Repurchase agreements for general-collateral government debt measure the short-term cost of riskless borrowing, thus avoiding issues relating to specialness of Treasury offerings or irregular term-to-maturity in the Treasury bill market. The spread between reverse and repo rates has previously been ignored by researchers who find that the pure expectation hypothesis either holds at this extremely short end of the term structure or that observed deviations from the expectations hypothesis are not economically significant. This paper shows that the time-varying realized forward premium at the short-end of the yield curve is consistently positive when accounting for the spread between repurchase and reverse repurchase agreement rates.     

The Market Value of UK Dividends From Shares With Differing Entitlements

Abstract:   This paper determines the market value of dividends in the UK during periods before and after 1997. Previous studies, which use the ex‐dividend day method, tend to provide noisy and potentially biased measures of dividend value. We estimate the value of dividends from the prices of shares that are identical except for their dividend entitlements, and are traded concurrently (within the same hour). We argue that our estimates of dividend value are the cleanest yet available for the UK. Our evidence suggests that ex‐dividend day estimates are biased downwards, but that this bias may be mitigated by the use of robust regression. Dividend values are heterogeneous and are not explained by the tax‐clientele hypothesis.     

An Economic Perspective on the Information Content of Magazine Advertisements

Numerous researchers have examined the information content of advertising. Most studies indicate that product category profoundly affects information content. This paper builds on previous research by applying Nelson's search-experience classification of product categories to examine the impact of product type on the information content of magazine advertisements. The results support Nelson's framework, but primarily for price, quality and availability information cues. The most surprising result is the high information content for experience durable goods.