ARE ATHLETES DOPED? SOME THEORETICAL ARGUMENTS AND EMPIRICAL EVIDENCE

Sports fans all over the world have recently witnessed an increasing number of spectacular doping cases, leading to considerable annoyance in the public. However, our knowledge regarding the prevalence of doping is still quite limited, leading some people to speculate that (nearly) all professional athletes are doped and possibly even have to be doped to be good enough to compete successfully in highly selective tournaments. On the other hand, particularly representatives of the sports associations pretend that since the number of positively tested athletes remains small, there are only a few "black sheep," while in general, the world of sport is clean and fair. In the recent past, a number of theoretical models have been developed that can be empirically tested, which, in the end, may lead to the formulation of policy recommendations (ranging from higher sanctions to legalizing doping). We review the more important models and present anecdotal as well as some quantitative empirical evidence on the prevalence as well as the determinants of doping. ( JEL K42, L83, M52)     

Short Selling and Efficient Sets

The effect of short selling on the composition and location of the efficient set has been analyzed in a variety of ways. However, the situation typically facing investors where the initial margin requirement is less than 100 percent and the riskfree interest rate that is paid on the short proceeds is less than the rate paid on initial margin has not previously been considered. The Elton-Gruber-Padberg algorithm (1976, 1978), subject to certain modifications, is shown here to be capable of identifying the efficient set under such conditions.     

DOES THE KYOTO PROTOCOL COST TOO MUCH AND CREATE UNBREAKABLE BARRIERS FOR ECONOMIC GROWTH?

We look to the literature on short-term cost models, long-term models based on endogenous growth, and long-term models that assume induced technical change, in order to demonstrate the current understanding of costs, which is the focus of the debate on abating climate change. Using these insights as well as other results—like the role of ancillary benefits and the lack of a relationship between decarbonization and economic growth—our contribution to this debate will be to help policy makers understand how economic analyses are conducted and how they should be used in the subsequent political discussions. (JEL Q52, Q54, Q58 )     

Momentum and Credit Rating

This paper establishes a robust link between momentum and credit rating. Momentum profitability is large and significant among low‐grade firms, but it is nonexistent among high‐grade firms. The momentum payoffs documented in the literature are generated by low‐grade firms that account for less than 4% of the overall market capitalization of rated firms. The momentum payoff differential across credit rating groups is unexplained by firm size, firm age, analyst forecast dispersion, leverage, return volatility, and cash flow volatility.     

Managerial Legacies,Entrenchment, and Strategic Inertia

This paper argues that the legacy potential of a firm's strategy is an important determinant of CEO compensation, turnover, and strategy change. A legacy makes CEO replacement expensive, because firm performance can only partially be attributed to a newly employed manager. Boards may therefore optimally allow an incumbent to be entrenched. Moreover, when a firm changes strategy it is optimal to change the CEO, because the incumbent has a vested interest in seeing the new strategy fail. Even though CEOs have no specific skills in our model, legacy issues can explain the empirical association between CEO and strategy change.     

More on Estimation Risk and Simple Rules for Optimal Portfolio Selection

For the risk-averse investor, consideration of estimation risk is important in selecting an expected-utility-maximizing portfolio. It has previously been shown that the composition of the tangency portfolio is unaffected by the recognition of estimation risk if the Full Covariance Model is used. Alternatively, if the Market Model is used, the composition of the tangency portfolio has been shown to be affected by the recognition of estimation risk. However, as is demonstrated in this paper, the effect will generally not be as substantive as previously believed and in many situations can be safely ignored.     

THE VALUE OF PRIVATE INFORMATION IN MONOPOLY*

We investigate a basic question about a monopoly with incomplete information: when does the seller have an incentive to allow potential buyers to acquire more private information about their tastes for the seller's product? Under plausible conditions such as log‐concave density of willingness‐to‐pay and convex marginal cost, the seller prefers that the paying customers be well informed as a group but be left in the dark regarding their individual tastes.