Investment with an arithmetic process and lags

This paper presents an explicit solution of a simple investment problem with entry lags and when the underlying stochastic process is arithmetic. It is shown that, without abandonment, the optimal investment plan is independent of the length of the lag. Copyright © 2000 John Wiley & Sons, Ltd.     

Weekday variations in short-term contrarian profits in futures markets

This article documents and examines weekday patterns in short-term contrarian profits in futures markets. The Lo and Mackinlay (1990) methodology is used to construct contrarian portfolios and to compute daily contrarian profits. Contrarian portfolios are formed using daily closing prices and are based on the previous day's performance relative to a benchmark. Contrarian profits are measured over subsequent half-day intervals. The empirical results suggest that there are weekday patterns in short-term contrarian profits in futures markets. On average, contrarian profits are largest on Fridays, followed by those on Wednesdays, and smallest on Mondays. For currency futures, however, contrarian profits are largest on Mondays and smallest on Fridays.     

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.     

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.     

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.