Are Information Attributes Priced?

A seminal model in finance links cost of equity capital to information precision, composition and dissemination. Using realized returns to proxy for cost of equity capital and the probability of an informed trade (PIN) to proxy for composition, prior research documents results consistent with the model's prediction regarding composition. Nonetheless, prior research that examines the construct validity cautions against the use of future realized returns to proxy for cost of equity capital and recommend r_{DIV_PREM} or r_{PEG_PREM} instead. The authors speculate but do not demonstrate how the results in existing research might be incorrect due to their use of realized returns. This paper provides such evidence. We find that the authors inference regarding PIN is dependent on their choice of realized returns to proxy for cost of equity capital. We also estimate a more complete specification of the model that includes precision and dissemination, and we decompose PIN into its component parts to isolate that portion of PIN that varies with dissemination. These refinements allow for new insights regarding the veracity of the model's predictions. We conclude that cost of equity capital is increasing in composition, and decreasing in dissemination, and find some, albeit not conclusive support, for the prediction that cost of equity capital is decreasing in precision.     

We do not measure what we aim to measure: Testing Three Measurement Models for Nationalism and Patriotism

The measurement models for both nationalism and patriotism originally developed by Blank and Schmidt are broadly established. Despite their widespread usage in Germany and beyond, concerns have been voiced about the operationalisation of these nation-related concepts. However, in previous scholarship little attention has been devoted to systematically reviewing the models’ validity. This paper’s major goal is to contribute substantially to research on operationalising national attitudes by thoroughly examining how both nationalism and patriotism are measured and how valid the predominant measurement models really are. By running a confirmatory factor analysis, three measurement models based on the ISSP data of 2003 are replicated and empirically reviewed. By conducting a single-country analysis, the models are tested for the German case, including the evaluation of measurement invariance for both Eastern and Western Germany. Although the selected measurement models yield satisfying results, the paper identifies considerable shortcomings with regard to the way both nationalism and patriotism are empirically approached. It calls for a reconceptualising of the prevailing concept of pride and thus challenges the predominant operationalisation.

     

Where the Grass Is Greener: Voluntary Turnover and Wage Premiums

Standard economic and compensation theories suggest that voluntary turnover should decline when a firm pays wages that are higher than those of its competitors. Turnover behavior in the State of California's Civil Service, however, does not support this prediction. Using a fixed-effects estimator to control for job-specific characteristics, I find that the wages California pays relative to those of its competitors has little or no effect on turnover. In addition, estimates of the elasticity of turnover with respect to alternative wages indicate that higher wage rates do not pay for themselves through lower turnover costs. Instead, the absolute wage level and wage growth have large effects. In other words, it appears that workers are less likely to quit jobs that pay high wages and have larger wage increases no matter how their wages compare with those paid by other employers.     

The Role of Information Precision in Determining the Cost of Equity Capital

We examine the association between the cost of equity capital and the quality of public and private information. We find an inverse relationship between the cost of capital and the precision of public information, but the effect is more than offset by a positive relationship between the cost of equity capital and the precision of private information. Public and private information precisions are positively correlated, and a model that fails to include both is vulnerable to a correlated omitted variable bias. The association between public and private information combined with their opposing effects on the cost of capital implies mangers should consider the relationship between public and private information when assessing their reporting strategy.     

Pay Secrecy and the Gender Wage Gap in the United States

Legislators and advocates claim that pay secrecy perpetuates the gender wage gap and that the Fair Labor Standards Act (FLSA) should be amended to outlaw these practices. Using a difference‐in‐differences fixed‐effects human‐capital wage regression, I find that women with higher education levels who live in states that have outlawed pay secrecy have higher earnings, and that the wage gap is consequently reduced. State bans on pay secrecy and federal legislation to amend the FLSA to allow workers to share information about their wages may improve the gender wage gap, especially among women with college or graduate degrees.     

Are Weekly Inflation Forecasts Informative?*

Are weekly inflation forecasts informative? Although several central banks review and discuss monetary policy issues on a bi‐weekly basis, there have been no attempts by analysts to construct systematic estimates of core inflation that supports such a decision‐making schedule. The timeliness of news releases are recognized to be an important information source in real‐time estimation. We incorporate real‐time information from macroeconomic releases and revisions into our weekly updates of monthly Swiss core inflation using a common factor procedure. The weekly estimates for Swiss core inflation show that it is worthwhile to update the forecast at least twice a month.