Large‐Sample Evidence on Firms’ Year‐over‐Year MD&A Modifications

The Securities and Exchange Commission (SEC) has expressed concern about the informativeness of firms’ Management Discussion and Analysis (MD&A) disclosures. A firm's MD&A is potentially uninformative if it does not change appreciably from the previous year after significant economic changes at the firm. We introduce a measure for narrative disclosure—the degree to which the MD&A differs from the previous disclosure—and provide three findings on the usefulness of MD&A disclosure. First, firms with larger economic changes modify the MD&A more than those with smaller economic changes. Second, the magnitude of stock price responses to 10‐K filings is positively associated with the MD&A modification score, but analyst earnings forecast revisions are unassociated with the score, suggesting that investors—but not analysts—use MD&A information. Finally, MD&A modification scores have declined in the past decade even as MD&A disclosures have become longer; the price reaction to MD&A modification scores has also weakened, suggesting a decline in MD&A usefulness.     

An Estimated Australian Macroeconomic Misery Index

The degree of community satisfaction with alternative macroeconomic outcomes is of considerable interest to policy makers. Ad hoc measures of community macroeconomic welfare, so-called Misery Indexes, are commonly used as proxies of such welfare These indexes are very rudimentary and make implicit restrictive assumptions about the community's marginal rates of substitution among different macroeconomic outcomes. The current paper demonstrates a framework for statistically estimating the relative responsiveness of community welfare to such variables as unemployment, inflation, interest rates, real wages and measures of Australia's external performance. Morgan Gallup Poll data are used to proxy levels of community (dis)satisfaction .     

Is US Monetary Growth a Leading Indicator of Australian Monetary Growth?

For an open economy the existence of internationally integrated goods and capital markets implies the country's monetary growth may be considerably influenced by fluctuations in international monetary circumstances. Theoretical literature exists which suggests US monetary growth may be catalytic in determining world monetary growth in general and the monetary growth of smaller. dependent economies in particular. In this paper , prima facie Australian statistical evidence is found which is consistent with this postulate. The lag in the association is identified and a model specified and estimated. A post-sample validation period supports and strengthens the within-sample results .