The Response of Equity Prices to Movements in Long‐Term Interest Rates Associated with Monetary Policy Statements: Before and After the Zero Lower Bound

Monetary policy actions since 2008 have influenced long‐term interest rates through forward guidance and quantitative easing. I propose a strategy to identify the comovement between interest rate and equity price movements induced by monetary policy when an observable representing policy changes is not available. A decline in long‐term interest rates induced by monetary policy statements has a larger positive effect on equity prices prior to 2009 than in the subsequent period. This change appears to reflect the impact of the zero lower bound on short‐term interest rates.     

Why Does Return Predictability Concentrate in Bad Times?

We build an equilibrium model to explain why stock return predictability concentrates in bad times. The key feature is that investors use different forecasting models, and hence assess uncertainty differently. As economic conditions deteriorate, uncertainty rises and investors' opinions polarize. Disagreement thus spikes in bad times, causing returns to react to past news. This phenomenon creates a positive relation between disagreement and future returns. It also generates time‐series momentum, which strengthens in bad times, increases with disagreement, and crashes after sharp market rebounds. We provide empirical support for these new predictions.     

Asymmetry,Complementarities, and State Dependence in Federal Reserve Forecasts

Forecasts are a central component of policymaking; the Federal Reserve's forecasts are published in a document called the Greenbook. Previous studies of the Greenbook's inflation forecasts have found them to be rationalizable but asymmetric if considering particular subperiods, for example, before and after the Volcker appointment. In these papers, forecasts are analyzed in isolation, assuming policymakers value them independently. We analyze the Greenbook forecasts in a framework in which the forecast errors for different variables are allowed to interact. We find that allowing the losses to interact makes the unemployment forecasts virtually symmetric, the output forecasts symmetric prior to the Volcker appointment, and the inflation forecasts symmetric after the onset of the Great Moderation.     

Houses as ATMs: Mortgage Refinancing and Macroeconomic Uncertainty

Mortgage refinancing activity associated with extraction of home equity contains a strongly countercyclical component consistent with household demand for liquidity. We estimate a structural model of liquidity management featuring countercyclical idiosyncratic labor income uncertainty, long- and short-term mortgages, and realistic borrowing constraints. We empirically evaluate its predictions for households' choices of leverage, liquid assets, and mortgage refinancing using microlevel data. Taking the observed historical paths of house prices, aggregate income, and interest rates as given, the model accounts for many salient features in the evolution of balance sheets and consumption in the cross-section of households over 2001 to 2012.     

HOW ENDAs EXTEND THE WORKWEEK: LEGAL PROTECTION AND THE LABOR SUPPLY OF BEHAVIORALLY GAY MEN

Employment Nondiscrimination Acts (ENDAs) have received much political attention in the recent past. Despite the political attention, very little research has investigated the impact of ENDAs. I analyze the impact of ENDAs on labor supplies, which is under‐researched in the policy analysis literature. My work is the first to investigate the labor supply patterns of behaviorally gay men using data that are representative of the entire behaviorally gay population. I show that ENDAs motivate behaviorally gay men to work roughly 15–20 h more per week and increase the probability that behaviorally gay men will supply any labor by approximately 7%. These results suggest that ENDAs increase the labor supply of behaviorally gay workers by increasing workplace tolerance of homosexuality. (JEL J2, J7, J1)     

An Empirical Investigation of the Effects of Rounding on the SPF Probabilities of Decline and Output Growth Histograms

I consider the possibility that respondents to the Survey of Professional Forecasters round their probability forecasts of the event that real output will decline in the future, as well as their reported output growth probability distributions. I make various plausible assumptions about respondents’ rounding practices, and show how these impinge upon the apparent mismatch between probability forecasts of a decline in output and the probabilities of this event implied by the annual output growth histograms. I find that rounding accounts for about a quarter of the inconsistent pairs of forecasts.     

What Shapes Assessment of Ability to Pay for Children's College Education?

Many parents have concerns about the cost of their child's college and lack information about preparing for those expenses. Parents' assessment of ability to pay for college are likely to influence their investments in a child's education, and may in turn affect the child's educational commitment and attainment. These potential outcomes lead us to investigate what accounts for parents' assessment. We use logistic regression to analyze data collected from mothers with newborn children (N = 2,566). The findings demonstrate that the mother's assessment of ability to pay for the child's education are significantly associated with material hardship experiences, financial management skills, educational expectations, and her education level. We discuss research and policy implications of promoting positive financial assessment for college early.     

VIDEO GAMES AND CRIME

Psychological studies find that video game play is associated with markers for violent and antisocial attitudes. It is plausible that these markers indicate either whetted or sated preferences for antisocial behavior. I investigate whether a proxy for video gaming is associated with the prevalence of various crimes and find evidence that gaming is associated with significant declines in crime and death rates. These results are robust to various alternative specifications. Other youth‐related leisure activities—sports and movie viewing—generate smaller or no effects. These results cast doubt on the desirability of proposed restrictions on video game marketing. (JEL L86, D18, I18)     

Farmer Gone Fish'n? Swidden Decline and the Rise of Grouper Fishing on Palawan Island,the Philippines

Considerable research has focused on understanding how upland farmers adjust land‐based livelihoods to the influences of agrarian change in Southeast Asia. In the process, an ‘upland bias’ has emerged where researchers focus narrowly on the uplands as localities with distinct, coherent features, neglecting how families engage place, social relations and ethnicity as they access opportunities in proximate spaces. This paper considers how the Tagbanua – long considered an upland swidden people – have ‘stepped back’ from swidden agriculture due to declining yields and debt to harvest the lucrative grouper (e.g. Plectropomus leopardus). We show how Tagbanua families on Palawan Island have adjusted swidden as they negotiate social relations, ethnic cleavages and economic barriers to effectively engage the grouper industry. Rather than cast such farmers and fishers as ideal types in place, we argue that how they negotiate social relations creates new livelihood opportunities in varied environments, reinforcing the dynamic, recursive context of agrarian change.     

Index of Consumer Expectations: Food Price Effects and Durable Goods Expenditures

The Index of Consumer Expectations (ICE), which includes expenditures on durable goods, has been adopted as a leading indicator of national economic activity. A rational expectations model of the ICE was developed and the economic determinants of consumers' expectations were estimated. Aggregate expenditures on durable goods were explained by an endogenous ICE and sentiment about current economic conditions. Consumers were more likely to purchase durable goods when they felt better off in the current period relative to the future.