Continuous Trading or Call Auctions: Revealed Preferences of Investors at the Tel Aviv Stock Exchange

We use the move of Israeli stocks from call auction trading to continuous trading to show that investors have a preference for stocks that trade continuously. When large stocks move from call auction to continuous trading, the small stocks that still trade by call auction experience a significant loss in volume relative to the overall market volume. As small stocks move to continuous trading, they experience an increase in volume and positive abnormal returns because of the associated increase in liquidity. Overall, though, a move to continuous trading increases the volume of large stocks relative to small stocks.     

On the stability of the cooperative type of organization

The stability of producer cooperatives in market economies is analyzed in a dynamic context. It is shown that, when permitted to hire wage laborers, a producer cooperative, even if its labor productivity is higher than in an otherwise equivalent capitalist firm, is likely to lose its cooperative character because members' personal income will be maximized when “expensive” members are replaced by “inexpensive” wage-laborers. Producer cooperatives will maintain their organizational character best when they operate in a marginal industry where cooperation enhances members' productivity so that their earnings exceed their opportunity wages. In general, competitive markets for membership are not a sufficient condition to prevent the transformation of cooperatives into capitalist firms.     

Endogenous contract structure and monetary policy

We analyze the co-determination of monetary policy and the labor contracts chosen by members of the public, who can either fix or index their nominal wages. Fixed nominal wages allow the central bank to offset productivity shocks, while the public fix nominal wages in response to the central bank offsetting shocks; so there is an equilibrium in which, realistically, nominal wages are fixed and shocks offset: a result which holds in single- as well as in multi-period games. In addition, there may be equilibria in which agents index their nominal wages, and the central bank optimally responds by stabilizing price. In contrast to conventional models, the Ramsey rule may be implemented in a finitely repeated game. The central bank does not deviate for fear that agents would change their labor contracts such that the central bank's least favored equilibrium will subsequently be played.     

The shifting boundaries of the mixed economy and the future of the nonprofit sector

The nonprofit sector exists because it can solve better than for-profit firms problems associated with the provision of products with publicness (nonrivalry or nonexcludability) attributes, or those affected by asymmetric information between providers and customers. This advantage is likely to be eroded in the future by various technological advances, particularly in the area of information transmission, analysis, storage and retrieval, and by the increase in the effective size of markets. Consequently, the demand for nonprofit organizations will possibly decline in the future. On the other hand, the operational efficiency of nonprofit organizations is likely to improve due to possibilities of stricter audit of and control over management made possible by enhanced access by nonprofit stakeholders to budgetary and operational information. This will help nonprofit organizations respond better to various failures of for-profit firms and to the insufficiency of government correctives. It is difficult to forecast the net effect of the myriad factors that work in opposite directions on the demand for and supply of nonprofit organizations, although it appears to this author that the economic weight of nonprofit organizations and their distinctive features will wane.     

Simultaneous estimation of work choices and the level of farm activity using panel data

We analyse the simultaneous determination and evolution overtime of work choices and the level of farm activity, using apanel of Israeli farm households. We estimate jointly a multinomialchoice model of work activity and an endogenous switching regressionof farm size, accounting for unobserved heterogeneity and correctingfor simultaneity bias. Our results imply that some family farmstend to expand over time and specialise in farming, whereasother farm households downsize their farming operation and increasetheir engagement in the off-farm labour market. Therefore, thesize distribution of farms is converging towards a bimodal distribution.     

Predictable events and excess returns: The case of dividend announcements

This paper hypothesizes that the risk per unit of time and the required rate of return are higher than normal during an event period whose timing can be predicted. Consistent with this hypothesis this paper presents empirical evidence indicating that the unconditional mean rate of return, the variance of stock returns and their systematic risk are higher than ‘usual’ during dividend announcement periods. However, the documented increases in the systematic risk are not large enough to fully explain the ‘excess returns’. This finding is puzzling and hard to reconcile with existing theory.