Stockholders’ Unrealized Returns and the Market Reaction to Financial Disclosures

Using both investor‐ and stock‐level data, I examine the relation between stockholders’ unrealized returns since purchase and the market response to earnings announcements. I demonstrate that stockholders’ unrealized gain/loss position moderates their trading behavior in response to earnings announcements. I also find that this behavior generates a short‐window return underreaction to earnings news. My results are generally consistent with predictions from prospect theory regarding the manner in which stockholders’ unrealized returns moderate their trading response to belief shocks. However, my results also suggest that an emotional component (i.e., regret‐avoidance/pride‐seeking) is necessary to explain the observed investor behavior.     

THE IMPACT OF NEW PRODUCT ANNOUNCEMENTS ON FIRM VALUE IN INFORMATION TECHNOLOGY PRODUCING INDUSTRIES: AN EXAMINATION OF INDUSTRY-LEVEL EVOLUTIONARY ERAS

We explored the market reaction to new IT product announcements by the hard drive manufacturing industry in relation to that industry's evolutionary cycle of innovation. In the short-term, there was no effect. In the long-term however, announcements made during an era of incremental technical change had more favorable reactions than announcements made during an era of ferment EXCEPT where those announcements represented an attempt to develop the emerging technology rather than further developing the existing dominant design.     

Labor Force Participation and Monetary Policy in the Wake of the Great Recession

This paper provides compelling evidence that cyclical factors account for the bulk of the post‐2007 decline in the U.S. labor force participation rate (LFPR). We then formulate a stylized New Keynesian model in which the LFPR is practically acyclical during “normal times” but drops markedly following a large and persistent aggregate demand shock. These considerations have potentially crucial implications for the design of monetary policy, especially when interest rate adjustments are constrained by the zero lower bound; specifically, monetary policy can induce a more rapid recovery of the LFPR by allowing the unemployment rate to fall below its natural rate.     

A Historical Analysis of the Taylor Curve

Taylor (1979) shows that there is a permanent trade‐off between the volatilities of the output gap and inflation. Although a number of papers argue that the so‐called Taylor curve is a policy menu, we use it as an efficiency locus to gauge the appropriateness of monetary policy. We examine the efficiency of U.S. monetary policy from 1875 onward by measuring the orthogonal distance between the observed volatilities of the output gap and inflation from the Taylor curve. We also identify time periods in which the variability of the U.S. economy changed by observing shifts in this efficiency frontier.     

A 'pricing-to-market' model with unobserved variables: explaining New Zealand's import prices

A model of ‘pricing-to-market’ (PTM) behaviour in import prices is developed for a small open economy to allow for two measurement problems: (i) that neither the marginal production cost of imported goods nor their corresponding (foreign-currency) export price are observable by the econometrician; (ii) that PTM behaviour, if it exists, alters the relationship between foreign countries' export price indices for total exports and the true, unobservable price index. The analysis shows that variations in the measured markup on import prices depends on the degree to which domestic demand is synchronized with world demand, whether bilateral exchange rate movements are due to domestic or foreign factors, and on the degree to which PTM behaviour differs from such behaviour in other countries. Equations estimated for the price of New Zealand (NZ) imports from the US strongly supports the model, and finds that the degree of PTM by US exporters in response to price and exchange rate movements is substantially greater in NZ than the average for other countries. However, the degree of PTM in NZ in response to excess demand is similar to that of other countries.     

Private Equity Performance and Liquidity Risk

Private equity has traditionally been thought to provide diversification benefits. However, these benefits may be lower than anticipated as we find that private equity suffers from significant exposure to the same liquidity risk factor as public equity and other alternative asset classes. The unconditional liquidity risk premium is about 3% annually and, in a four‐factor model, the inclusion of this liquidity risk premium reduces alpha to zero. In addition, we provide evidence that the link between private equity returns and overall market liquidity occurs via a funding liquidity channel.     

Increasing Health Club Attendance Through Self-Prophecy

Prior research has shown that asking people to anonymously predict whether they will perform a socially desirable behavior increases their probability of performing the action (Sherman, 1980). This article extends the empirical base of the phenomenon in a consumer service context demonstrating that an anonymous prediction request can increase likelihood of performing a socially desirable real-world behavior (working out at a health club). The effect was also observed for the first time over an extended time period (six months). The article concludes with tentative theory-relevant generalizations regarding the phenomenon and directions for further research.